## 1ecuea2025002-source-pdf ## Source details **Canonical URL:** [1ecuea2025002-source-pdf](https://www.imf.org/-/media/files/publications/cr/2025/english/1ecuea2025002-source-pdf.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2025/english/1ecuea2025002-source-pdf.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2025/english/1ecuea2025002-source-pdf.pdf.json) --- ### Executive Summary — context, recent performance, and outlook - Program: Extended Fund Facility (EFF) arrangement of SDR 3.75 billion (537 percent of quota, about US$5 billion), approved May 2024 and augmented July 2025. - Political context: President Noboa began a four-year term in May 2025; referendum scheduled for November 16, 2025. - H1 2025 macro outcomes: - Real GDP growth: 3.8 percent (y/y) in the first half of 2025. - Inflation: 0.7 percent (y/y) as of September 2025; excluding electricity: 0.5 percent (y/y). - Current account (CA) surplus 2025H1: US$5.2 billion (4 percent of projected GDP). - Gross international reserves: US$8.3 billion as of end-September 2025 (up US$1.4 billion since end-2024). - Program performance: All end-August 2025 quantitative performance criteria and most indicative targets for the third review met; exceptional access criteria continue to be met. - Staff outlook: - Real GDP projected: 3.2 percent in 2025 (revised up from 1.7 percent). - Medium-term real GDP growth: 3 percent. - Inflation: temporary rise to 3.6 percent in December 2025; 1.7 percent by end-2026 and near 1.5 percent thereafter. - Terms of trade: projected to fall 1.6 percent in 2025. - Public debt-to-GDP: expected to decline to 40 percent by 2031. ### Recent shocks and sectoral developments - Oil sector disruptions (July 2025 heavy rainfall and Esmeraldas refinery fire): - Loss of 12 million barrels (~7 percent of expected annual output). - Combined impact on trade balance and fiscal revenues: about 0.9 and 0.3 percent of GDP, respectively. - Adverse temporary fiscal impact in 2025H2: about 0.3 percent of GDP, financed by higher domestic financing. - Security: homicides rose 38 percent Jan–Aug 2025 vs same period 2024; 90 percent in coastal provinces (~half of population). - Financial system: deposits grew 16.4 percent (y/y) in August 2025; credit to private sector rose 8.7 percent (y/y); financial soundness indicators largely stable as of July 2025. ### Fiscal performance through August 2025 (central government and NFPS) - Central government (PGE & CFDD) year through August: - NOPB: -0.2 percent of GDP (target: -0.9). - Primary balance: 0.5 percent of GDP (target: 0.2). - Overall balance: -1.7 percent of GDP (target: -2.0). - Domestic arrears (PGE to private sector): US$660 million at end-April → US$480 million at end-August 2025 (end-August IT was US$400 million and was not met). - NFPS preliminary through August: - NOPBS: -1.9 percent of GDP (target: -2.4). - Primary balance (including oil): 0.6 percent of GDP (target: 0.4). - Overall balance: -0.3 percent of GDP (target: -0.8). - NFPS deposits at the BCE: US$4.9 billion as of end-August; projected US$5.2 billion by year-end and US$9.2 billion by end of program. ### External sector and reserves — key figures - Exports growth Jan–Aug 2025: 7.7 percent (y/y); nonoil exports up 20 percent. - Gross international reserves: US$8.3 billion as of end-September 2025. - Reserves as percent of ARA metric: about 30 percent (excluding Liquidity Fund) and 49 percent (including Liquidity Fund), up from 26 (43) percent at end-2024. - Net international reserves: minus US$6.8 billion, improved by US$0.8 billion through end-August. - Current account (selected): 2024 CA US$3,9 billion (3.1 percent) → 2025H1 US$5.2 billion (4 percent of projected GDP). ### Revenue performance, composition, and projections - Cumulative increase in nonoil tax revenues since program start: 2.2 percent of GDP. - Nonoil tax revenues (percent of GDP): 2023 = 12.4; 2024 = 13.6; 2025 = 14.4; 2026 = 14.6. - Projected contributors to 2026 nonoil tax revenues: - Goods and services: 2023 = 6.1; 2024 = 6.7; 2025 = 7.2; 2026 = 7.3. - Income tax: 2023 = 3.8; 2024 = 4.3; 2025 = 4.5; 2026 = 4.5. - Trade and international transactions: 2023 = 1.6; 2024 = 1.5; 2025 = 1.6; 2026 = 1.7. - Property Tax: 2023 = 0.7; 2024 = 0.9; 2025 = 0.8; 2026 = 0.6. - Other taxes: 2023 = 0.2; 2024 = 0.2; 2025 = 0.3; 2026 = 0.4. - Revenue measures in 2024 and 2025 expected to raise nonoil tax revenues by 0.7 percent of GDP to 14.4 percent of GDP in 2025; additional measures projected to add 0.2 percent of GDP in 2026. ### Expenditure rationalization and procurement reforms - Government streamlining (launched July 2025): ministries reduced from 20 to 14; secretariats from 9 to 3. - National Control Subsystem (NCS) operationalization with IDB TA; SOCE upgrade planned (end-July 2025 SB reset to end-December 2025). - Preliminary fiscal savings estimate from reforms: about 0.5 percent of GDP in coming years. - Combined with 0.9 percent of GDP expenditure consolidation in 2024 and prudent public sector wage policies: expected total expenditure consolidation of 1.7 percent of GDP through 2028. ### NFPS fiscal outlook and consolidation path - NFPS overall deficit projected for 2025: 1.2 percent of GDP (revised). - NOPBS deficit projection: shrink by 1.3 percent of GDP in 2025. - Early retirements: projected to increase social security outlays in 2025 by about 0.1 percent of GDP relative to the second review. - NFPS fiscal aggregates (percent of GDP, selected): - Overall Balance: 2024 = -1.3; 2nd review = -0.9; Revised 2025 = -1.2. - Nonoil Balance: 2024 = -2.9; 2nd review = -2.6; Revised 2025 = -2.6. - Revenues: 2024 = 23.7; 2nd review = 24.1; Revised 2025 = 24.2. - Expenditures: 2024 = 26.6; 2nd review = 26.7; Revised 2025 = 26.7. - Oil Balance: 2024 = 2.7; 2nd review = 2.8; Revised = 2.5. - Memo: NOPBS: 2024 = -5.4; 2nd review = -4.0; Revised = -4.1. - NFPS Fiscal Consolidation Plan (change in NOPBS, percent of GDP): - Total 2024–28 = 6.6. - Row totals: 2024 = 2.2; 2025 = 1.3; 2026 = 1.6; 2027 = 1.0; 2028 = 0.6. ### Public debt trajectory and debt dynamics - Public debt (baseline, percent of GDP): 2024 actual = 53.8; projections: 2025 = 53.0; 2026 = 51.9; 2027 = 50.1; 2028 = 48.1; 2029 = 45.6; 2030 = 42.7; 2031 = 39.6. - Year-on-year change in public debt (percent of GDP): 2025 = -0.6; 2026 = -0.8; 2027 = -1.1; 2028 = -1.8; 2029 = -2.0; 2030 = -2.5; 2031 = -3.0. - Gross financing needs (GFN, percent of GDP): series includes 8.5 (2024), 6.3 (2025), 5.4 (2026), 5.1 (2027), 3.8 (2028), 3.9 (2029), 4.0 (2030). - Debt sustainability assessment: public debt sustainable but not with high probability; baseline assumes NFPS primary balance nil in 2025, converging to primary surplus of 2.4 percent of GDP medium term. ### Financing plan, market access, and Fund credit metrics - Program financing: fully financed with firm commitments for next 12 months. - Authorities plan to issue US$1 billion in the second half of 2026; amortization of 2030 global bonds: two principal payments of US$400 million due end-January 2026 and end-July 2026. - Market access assumptions: US$1 billion in 2026, US$1.5 billion in 2027, US$2 billion in 2028. - Fund credit outstanding: expected to peak in 2025 reaching 1032.8 percent of quota and 24.4 percent of exports (Table 9 references). - Ecuador’s credit outstanding with the Fund as of end-September 2025: SDR6.6 billion (US$9.1 billion, or 948 percent of quota) — necessitating exceptional access. ### Financial sector stability, supervision, and market development - Banking indicators (selected): - Regulatory capital to risk-weighted assets: 2024 = 15.0. - Nonperforming loans to total gross loans (banking system): 2024 = 4.8. - Provisions to NPLs: 2024 = 154.5. - Return on assets: 2024 = 1.5. - Interest rate caps: evidence of distortions, especially in microcredit segment; study implemented with delay informs gradual liberalization and enhanced supervision. - Cooperative sector: some credit cooperatives and small banks face weak capitalization; supervisory actions intensified; a medium-sized cooperative liquidated in late July (deposits US$216 million; US$126 million covered by deposit insurance; COSEDE cost estimated at US$66 million). - Domestic market development: - DCV modernization: ready by early-2026; RTGS complement planned. - Regulation for domestic market auctions: end-November 2025 SB. - Plan to launch auctions for bonds and treasury notes in 2026 (proposed SB end-September 2026). ### Structural reforms, governance, AML/CFT, and SOEs - Energy and electricity reforms: - Decree (June 2025) streamlined approvals for private NCRE projects up to 100 MW. - Secondary regs to allow sale of surplus self-generated electricity to the grid (end-August 2025 SB, met). - Adopted transparent, cost-reflective pricing mechanism for medium- and high-voltage tariffs (end-August 2025 SB, met). - 12 NCRE projects planned to contribute 833 MW of power. - Mining and hydrocarbons: - Reopened mining cadaster mid-June 2025 for non-metallic small-scale mining; regulation for full reopening due end-June 2026. - New fiscal regime for mining in development (end-December 2025 SB) with IMF TA. - SOE governance: - Audits completed: Petroecuador and Petroamazonas 2019 and 2020; Petroecuador 2021 audit completed (end-September 2025 SB, met). - Public tender to audit Petroecuador 2022–2024 proposed by end-February 2026. - AML/CFT: - New AML/CFT law approved July 2024; entered into force July 2025. - AML/CFT Strategic Action Plan under preparation (end-September 2025 SB, proposed reset to end-January 2026). - UAFE independence and capacity enhancements prioritized. ### Social safety net and distributional measures - Cash transfer programs: - Enrollment: 1,257,536 families as of August 2025 (exceeding end-August IT). - October 2025 expansion: +55,000 families in first three income deciles. - Poverty rate fell by 1.5 points to 24 percent as of June 2025 vs June 2024. - Compensatory measures for diesel reform implemented September 2025: fiscal cost approximately 0.2 percent of GDP in 2025. ### Risk assessment — major downside and upside risks - Downside risks (selected): external financing gaps; global economic deterioration; oil balance falling below expectations; worsening security; extreme weather impacting energy and oil production; weaker financial institution balance sheets; political instability delaying reforms. - Upside risks: stronger global growth; higher oil prices; continued nonoil export overperformance; improved security; more effective reforms. - Annex III stress and fan-chart diagnostics: debt fanchart width signaling uncertainty; probability of debt non-stabilization flagged; GFN financeability index signals Low risk; medium-term tools flag Moderate sovereign risk driven by confidence interval width. ### Program implementation, structural benchmarks, and monitoring - QPCs and ITs: - All QPCs for the third review met; some ITs not met (e.g., end-August domestic arrears ceiling). - Selected Table 2 reported lines (examples preserved as in source): NOPB series entries: -341 -341 294 Met; PGE arrears stock entries: 600 660 Not Met; 400 480 Not Met. - Structural benchmarks (selection and status): - Met: publish MTFF (end-Oct 2024); MTDS (end-Oct 2024); establish Financial Stability Committee (end-Sep 2024); issue macroprudential capital buffers (end-Nov 2024); enact AML/CFT law (end-Feb 2025). - Not met / implemented with delay: automatized PGE payments (end-Jul 2025 SB; implemented with delay); SOCE upgrade (end-Jul 2025 SB; not met; reset to end-Dec 2025); MEF–IESS agreement (end-Aug 2025 SB; not met; proposed reset end-Nov 2025); AML/CFT Action Plan (end-Sep 2025; not met; proposed reset end-Jan 2026). - Data provision and reporting: - Enhanced reporting timetable: daily, weekly, monthly, quarterly templates with specified lags (daily: 1 business day; weekly: 5 business days; monthly NFPS debt: 90 days; etc.). - Adjustors for targets: oil price adjustor US$23.85 million per US$1 deviation (caps US$178.9 million); NIR oil adjustor US$11.93/US$23.85 million per US$1 deviation depending on target. - Staff recommendations: - Support completion of the third review and rephasing of fourth and fifth review test dates; complete financing assurances review. *International Monetary Fund — Executive Summary and IMF staff report excerpts (content unit).* ### EXECUTIVE SUMMARY ### EXECUTIVE SUMMARY ### Context - The authorities implemented an economic program supported by the Extended Fund Facility (EFF) arrangement of SDR 3.75 billion (537 percent of quota, about US$5 billion), approved by the Executive Board in May 2024 and augmented in July 2025. - Authorities have taken actions to strengthen fiscal sustainability and liquidity buffers while protecting the most vulnerable, including: - implementing high-quality revenue and expenditure reforms alongside targeted compensatory measures; - advancing structural reforms to safeguard financial stability, enhance governance, and boost private investment and job-rich growth. - President Noboa began a four-year term in May 2025 and forged a working legislative majority. A referendum is scheduled for November 16, focused on security and institutional reforms. ### Recent macroeconomic developments and program performance - Real GDP and sectoral dynamics: - Real GDP grew by 3.8 percent in the first half of 2025 (y/y), driven by recovery in private consumption and investment and record non-oil exports. - Expansion driven by the nonoil sector, with notable contributions from agriculture and trade. - Oil sector and shocks: - Heavy rainfall in July forced closure of major oil pipelines, resulting in a loss of 12 million barrels (about 7 percent of expected annual output); repairs completed by end-July and production normalized by August. - A fire at the Esmeraldas refinery disrupted domestic production of oil derivatives, increasing derivative imports. - Combined impact on trade balance and fiscal revenues was about 0.9 and 0.3 percent of GDP, respectively. - The oil disruption is estimated to have an adverse temporary fiscal impact of about 0.3 percent of GDP in the second half of the year, covered by higher domestic financing. - Security: - Homicides rose by 38 percent from January to August 2025 relative to the same period in 2024; 90 percent of homicides occurred in the coastal provinces (which make up about half of the population). - Inflation: - Inflation returned to 0.7 percent year-on-year as of September 2025. - Excluding electricity, consumer price inflation stood at 0.5 percent y/y. - Fiscal performance through August 2025: - Central government (PGE & CFDD) in the year through August recorded: - NOPB: -0.2 percent of GDP (target: -0.9) - Primary balance: 0.5 percent of GDP (target: 0.2) - Overall balance: -1.7 percent of GDP (target: -2.0) - Domestic arrears: stock of PGE arrears to domestic private sector fell from US$660 million at end-April to US$480 million as of end-August 2025 (end-August IT was US$400 million and was not met). - NFPS preliminary outturns through August: - NOPBS: -1.9 percent of GDP (target: -2.4) - Primary balance (including oil): 0.6 percent of GDP (target: 0.4) - Overall balance: -0.3 percent of GDP (target: -0.8) - NFPS deposits at the BCE stood at US$4.9 billion as of end-August, exceeding the NFPS deposit accumulation target; NFPS deposits are projected to rise to US$5.2 billion by year-end and by US$9.2 billion by the end of the program. - External sector and reserves: - CA surplus in 2025H1: US$5.2 billion (4 percent of projected GDP), up from US$3.9 billion (3.1 percent) in 2024H1. - Exports grew 7.7 percent (y/y) in January–August 2025 (nonoil exports up 20 percent). - Gross international reserves reached US$8.3 billion as of end-September, rising by US$1.4 billion since end-2024. - Reserves account for about 30 (49) percent of the IMF’s reserve adequacy metric excluding (including) the Liquidity Fund, up from 26 (43) percent at end-2024. - Net international reserves remained negative at minus US$6.8 billion but improved by US$0.8 billion through end-August. - Financial sector: - Deposits grew by 16.4 percent (y/y) in August 2025; credit to the private sector rose 8.7 percent (y/y). - Financial soundness indicators remained largely stable as of July 2025, with banks improving asset quality, provisioning, and profitability; cooperatives returned to growth with better liquidity and stabilizing NPL ratios. - Program performance: - All end-August 2025 quantitative performance criteria and most indicative targets for the third review have been met, some with significant margins. - Substantial progress on structural benchmarks, notably on fiscal, governance, and growth-enhancing reforms. - Staff assesses that the exceptional access criteria continue to be met. ### Outlook and key projections - Growth and inflation: - Real GDP projected to rise by 3.2 percent in 2025 (revised up from 1.7 percent at the time of the second review). - Medium-term real GDP growth projection: 3 percent. - Inflation projection: temporary rise to 3.6 percent in December 2025 due to one-off price level effects; expected to drop to 1.7 percent by end-2026 and stabilize near 1.5 percent thereafter. - External sector: - Terms of trade projected to fall slightly by 1.6 percent in 2025. - CA surplus expected to remain high in 2025 and gradually return to about 3 percent of GDP as cyclical factors fade. - Fiscal path and debt: - Programmed consolidation of 6.6 percent of GDP in the NFPS nonoil primary balance including fuel subsidies (NOPBS) over the program. - Public debt-to-GDP ratio expected to decline to 40 percent of GDP by 2031 (target set by the Organic Budget Law (COPLAFIP)), one year ahead of schedule. ### Risks - Downside risks (examples listed in Annex II): - External financing gaps increasing liquidity pressures. - Global economic deterioration from trade tensions or financial market volatility. - Oil balance falling below expectations. - Worsening security. - Extreme weather events affecting energy and oil production. - Weaker financial institution balance sheets. - Rising political instability slowing reforms. - Upside risks: - Stronger global growth, higher-than-expected oil prices, continued overperformance of nonoil exports, improved security, and more effective reforms. ### Policy discussions and reforms - Strengthening fiscal sustainability: - Recent revenue measures and reforms include: - introduction of a fee on small parcel transactions; - establishment of new fees on the mining sector and work on an enhanced fiscal regime for mining (end-December 2025 structural benchmark) with IMF TA; - revamped taxation framework for dividends and introduction of a new tax on undistributed corporate dividends and retained earnings; - alignment of domestic diesel prices with international prices alongside compensation mechanisms to protect vulnerable groups; - acceleration of sale of mobile broadband concessions and efforts to strengthen tax administration. - These initiatives, together with higher VAT revenues from the VAT rate increase enacted in 2024, are expected to increase nonoil tax revenues by 0.7 percent of GDP to 14.4 percent of GDP in 2025, more than offsetting the effect of the expiration of temporary revenue measures enacted earlier. - Social safety net: - Authorities implemented targeted compensatory measures to protect vulnerable groups alongside fiscal reforms. - Safeguarding financial stability: - Authorities continued advancing reforms to safeguard financial stability; financial system liquidity improved and borrowing costs fell, supporting credit growth. - Advancing structural reforms, governance, competitiveness, and job-rich growth: - Continued focus on governance enhancements and reforms to boost private investment and create jobs. - Authorities committed to implementing new structural benchmarks to further advance the reform agenda. ### Program modalities and staff assessment - Program modalities: - Discussions held in Washington DC and remotely during September 18–October 8, 2025. The mission team composition and authorities met are listed in the document. - Staff appraisal: - Overall program performance is strong, with decisive policy steps and continued commitment to reforms mitigating overall high risks to the outlook. - Staff assesses Ecuador’s external position as broadly in line with the level implied by medium-term fundamentals and desirable policies (Annex I). *International Monetary Fund — Executive Summary (October 19, 2025)* ### 2024. The revenue measures are expected to further boost nonoil tax revenues by an additional ### 1ecuea2025002-source-pdf - 2024. The revenue measures are expected to further boost nonoil tax revenues by an additional ### Revenue performance and projections - Nonoil tax revenues are projected to reach 14.6 percent of GDP in 2026, boosted by revenue measures that add 0.2 percent of GDP to nonoil tax revenues. - Cumulative increase in nonoil tax revenues since the start of the program: 2.2 percent of GDP. - Projected components of nonoil tax revenues (In percent of GDP): - Nonoil tax revenues: 2023 = 12.4; 2024 = 13.6; 2025 = 14.4; 2026 = 14.6 - Goods and services: 2023 = 6.1; 2024 = 6.7; 2025 = 7.2; 2026 = 7.3 - Income tax: 2023 = 3.8; 2024 = 4.3; 2025 = 4.5; 2026 = 4.5 - Trade and international transactions: 2023 = 1.6; 2024 = 1.5; 2025 = 1.6; 2026 = 1.7 - Property Tax: 2023 = 0.7; 2024 = 0.9; 2025 = 0.8; 2026 = 0.6 - Other taxes: 2023 = 0.2; 2024 = 0.2; 2025 = 0.3; 2026 = 0.4 - Oil balance improvement: projected to improve by about 1½ percentage points of GDP by end-2026, driven by higher domestic fuel prices and efforts to increase oil output and efficiency. - Work with World Bank TA on tightening rules and implementing a new evaluation framework for granting tax benefits for investment contracts, expected to lower tax expenditures in coming years. ### Expenditure rationalization, procurement, and savings - Streamlining of government structure (launched July 2025): ministries from 20 to 14; secretariats from 9 to 3 to reduce redundancies and improve efficiency. - Operationalization of the National Control Subsystem (NCS) with IDB TA to increase procurement transparency (plan established in 2024). - Development of upgraded Official System of Public Procurement (end-July 2025 SB, proposed reset to end-December 2025). - Preliminary estimate of fiscal savings from these reforms: about 0.5 percent of GDP in coming years. - Combined with 0.9 percent of GDP expenditure consolidation in 2024 and prudent public sector wage policies, expected total expenditure consolidation of 1.7 percent of GDP through 2028 (¶15). ### Fiscal outlook and targets (2024–2026) - NFPS (including oil) deficit projected for 2025: 1.2 percent of GDP (now projected), slightly below the 2024 outturn, reflecting a stronger nonoil balance despite oil output shock. - July oil output shock impact: lowers export revenue and increases fuel derivatives imports, negatively impacting overall NFPS balance by 0.3 percent of GDP in 2025 relative to the second review (¶2 and ¶5). - NOPBS deficit projection: shrink by 1.3 percent of GDP in 2025 largely due to fuel price realignment and improved nonoil revenue (¶14). - 2025 fiscal targets adjusted for temporary effects; increased social security spending from more early retirements projected to be offset by gains in nonoil revenue and expenditure reallocations. - Early retirements projected to increase social security outlays in 2025 by about 0.1 percent of GDP relative to the second review, with fiscal impact fading over time. - NFPS fiscal aggregates (In percent of GDP; table comparing 2024, 2nd review, Revised for 2025): - Overall Balance: 2024 = -1.3; 2nd review = -0.9; Revised = -1.2 - Nonoil Balance: 2024 = -2.9; 2nd review = -2.6; Revised = -2.6 - Revenues: 2024 = 23.7; 2nd review = 24.1; Revised = 24.2 - Expenditures: 2024 = 26.6; 2nd review = 26.7; Revised = 26.7 - Of which: social security: 2024 = 5.8; 2nd review = 5.8; Revised = 5.9 - Oil Balance: 2024 = 2.7; 2nd review = 2.8; Revised = 2.5 - Interest: 2024 = 1.1; 2nd review = 1.1; Revised = 1.1 - Memo item: NOPBS: 2024 = -5.4; 2nd review = -4.0; Revised = -4.1 ### NFPS Fiscal Consolidation Plan (Change in the nonoil primary balance including fuel subsidies, in percent of GDP) - Revenue and expenditure changes (selected values from plan, percent of GDP): - Revenue: 2024 = 1.2; 2025 = 1.4; 2026 = 1.2; 2027 = 0.6; 2028 = 0.4; 2024-28 total = 4.9 - Tax revenue: 2024 = 1.2; 2025 = 0.7; 2026 = 0.2; 2027 = 0.3; 2028 = 0.2; 2024-28 total = 2.7 - Other revenue: 2024 = 0.0; 2025 = 0.6; 2026 = 1.0; 2027 = 0.3; 2028 = 0.2; 2024-28 total = 2.1 - Expenditure: 2024 = 0.9; 2025 = -0.1; 2026 = 0.4; 2027 = 0.4; 2028 = 0.1; 2024-28 total = 1.7 - Wages and salaries: 2024 = 0.2; 2025 = 0.3; 2026 = 0.2; 2027 = 0.3; 2028 = 0.3; 2024-28 total = 1.2 - Goods and services: 2024 = 0.6; 2025 = -0.1; 2026 = 0.3; 2027 = 0.1; 2028 = 0.1; 2024-28 total = 1.0 - Social and capital: 2024 = 0.3; 2025 = -0.1; 2026 = -0.3; 2027 = -0.3; 2028 = -0.3; 2024-28 total = -0.6 - Other: 2024 = -0.1; 2025 = -0.2; 2026 = 0.1; 2027 = 0.3; 2028 = 0.0; 2024-28 total = 0.1 - Total (row): 2024 = 2.2; 2025 = 1.3; 2026 = 1.6; 2027 = 1.0; 2028 = 0.6; 2024-28 total = 6.6 ### Medium-term consolidation and debt objective - 2026 fiscal plan envisages further fiscal consolidation of 1.6 percent of GDP in the NOPBS driven by increased nonoil revenues, lower fuel subsidies, and expenditure rationalization. - Higher projected oil price relative to the second review and modification of gasoline price adjustment formula (enacted August 2025) expected to support fiscal balance. - Authorities expected to submit a draft budget for 2026 to the National Assembly in line with the EFF fiscal program (proposed SB for end-November 2025). - Medium-term targets: total fiscal consolidation of 6.6 percent of GDP in the NFPS NOPBS and 5 percent of GDP in the primary balance over the program period. - Aim: place public debt on a firm downward trend and achieve 40 percent of GDP public debt target set by COPLAFIP by 2031, one year ahead of schedule. ### Public financial management and governance reforms - Automation of central government payments implemented with IMF TA to prioritize payments and increase transparency (end-July 2025 SB, met with delay in September 2025). - Fiscal Safeguards Review (FSR): Ecuador’s PFM system offers broadly adequate safeguards for Fund resources used for budget support. - MEF and IESS working on agreement to settle longstanding past healthcare obligations and process future claims (end-August 2025 SB, not met, proposed reset to end-November 2025). - Plan to publish an audited actuarial report for the social security system with data up to 2024 (proposed SB for end-December 2026). ### Financing plan and market access - Program fully financed with firm financing commitments for the next 12 months and good prospects thereafter. - Revised plan envisages somewhat higher domestic financing in 2025 to accommodate the oil output shock and a slightly slower path of domestic arrears clearance while maintaining end-2025 NFPS deposit-buildup target. - Projects under preparation expected to disburse about US$428 million in 2026, covering amortizations in the next 12 months. - Gross financing commitments from other official bilateral creditors expected to broadly cover debt amortizations due in the next 12 months (US$100 million). - Sovereign spread movements and ratings: - Since April 2025 elections, spreads narrowed by over 1,000 basis points; stood at about 800 basis points as of second week of October. - Standard & Poor’s reaffirmed Ecuador’s credit rating at B- in August 2025 and changed outlook from negative to stable. - Authorities’ financing plan envisages returning to international capital markets by issuing US$1 billion in the second half of 2026. - Amortization of 2030 global bonds: two principal payments of US$400 million due at end-January 2026 and end-July 2026. - Planned US$1 billion issuance would imply a modest increase of external bonded debt of US$200 million in 2026. - Commercial financing flows from Chinese lenders contemplated in the financing plan. - Note on official bilateral support: EXIM China allowed more time for identification and preparation of viable projects and remains committed to support through project financing to at least cover remaining official exposure until end of program. ### Social safety net measures - Compensatory measures for higher diesel prices implemented September 2025 targeting transport, freight, agriculture, and fishing; estimated fiscal cost: approximately 0.2 percent of GDP in 2025. - Poverty rate fell by 1.5 points to 24 percent as of June 2025 compared to June 2024. - Enrollment in cash transfer programs: reached 1,257,536 families as of August 2025, exceeding the end-August IT. - October 2025: coverage extended by adding 55,000 families in the first three income deciles, prioritizing older adults and individuals with special abilities. - Social registry updates with local government support to reduce coverage gaps and better target programs. ### Financial stability, supervision, and market development - Reform to Organic Monetary and Financial Code (COMYF): merger of the Financial and Monetary Policy and Regulation Boards into a single Financial and Monetary Board to improve policy coordination and decision making; recommendation to separate macroprudential decision-making and communications from monetary policy under the single board. - Backing rule alignment with maturity profile of legacy government debt held by the BCE; postpones earmarking of international reserves and allows more flexible use of international liquidity for external payments. - Financial sector vulnerabilities: certain credit cooperatives and small banks face poor asset quality, weak capital buffers, and low or negative profits; regulatory forbearance measures expired and supervisors must enforce loan classification and provisioning. - Supervisory actions and capacity building: - Norms issued to strengthen credit cooperative governance; intensified supervision of weaker entities. - SB and SEPS and BCE developing stress testing models with IMF support; data sharing improved. - Credit registry updates for private bureaus to move from every 45 days to daily. - New law on credit strengthening and sustainability allows BIESS to leverage its balance sheet for liquidity; needs matched by improvements in BIESS governance, capacity, and risk management. - Resolution framework enhancements: - Inter-institutional group formed in January 2025 to coordinate resolution policy within the Financial Stability Committee. - Agenda: strengthen resolution framework, establish objectives and principles, review legal powers, identify gaps, outline priority reforms, review separation of supervisory and resolution functions, undertake crisis simulations, amend purchase and assumptions regulations to facilitate orderly resolution. - A medium-sized credit cooperative was put on forced liquidation in late July; deposits of the intervened entity amounted to US$216 million, including US$126 million covered by deposit insurance. Total cost for COSEDE estimated at US$66 million due to partial transfer of insured deposits to other credit cooperatives. - Interest rate liberalization: - BCE study: lending interest rate caps created inefficiencies and distortions, leading to credit rationing and adverse selection in high-risk segments. - Interest rate caps: not binding in some segments (commercial and corporate loans) but more binding in microcredit segment. - Authorities plan a new methodology for interest rates reflecting market conditions; liberalization to be gradual and supported by enhanced supervision, risk management, liquidity coverage enforcement, and development of domestic bonds and money markets. - Domestic capital market development: - Ecuador has one of the lowest shares of government debt held domestically among regional peers (sample average = 50.2, chart lists Brazil, Mexico, Colombia, Peru, Uruguay, El Salvador, Ecuador, Panama). - Regulations for domestic market auctions for bonds and treasury notes: on track (end-November 2025 SB). - Plan to launch domestic market auctions for bonds and treasury notes in 2026 (proposed SB for end-September 2026). - BCE's central securities depository (DCV) modernization: ready by early-2026 with modernized compensation, liquidation, and custody functions; complement with real-time settlement system (RTGS) for high-value payments. ### Structural reforms, competitiveness, and growth - Energy sector and electricity supply: - Plans to increase electricity supply and private investment in non-conventional renewable energy (solar, wind, geothermal). - June 2025 decree: streamlined approval for private non-conventional renewable and transitional energy projects up to 100 MW and offered clean energy preferential pricing. - Measures to reform electricity prices for industrial and mining sectors to ensure cost recovery and reduce energy subsidies (end-August 2025 SB, met). - Secondary regulations enacted to allow private entities to sell surplus self-generated electricity to the national grid (end-August 2025 SB, met). - Mining sector and trade: - Reopening of the mining cadaster: reopened mid-June 2025 for non-metallic small-scale mining with a new digital system; regulations for full reopening committed by end-June 2026 SB. - New fiscal regime for mining sector in development (end-December 2025 SB) with IMF TA, including sovereign adjustment mechanism via Mining Law Regulation changes. - Trade negotiations: finalizing trade agreements with Canada and South Korea; trade talks with the US; initiated discussions with the United Arab Emirates and Japan. - Potential focus area: modernizing customs to further facilitate trade. - Labor market and job-rich growth: - Measures to promote job-rich growth include tax incentives for hiring and programs to reduce youth employment. - Outcomes: helped reduce unemployment (especially among youth), reduce informality, and increase labor force participation, especially among women. - Further reforms recommended: increase labor market flexibility, reduce informality, and foster competition to promote a more efficient, competitive, and productive economy. *IMF staff summary of Ecuador program chapter content (source PDF).* ### 27. Strengthening macroeconomic resilience to natural disasters is essential for reducing ### 27. Strengthening macroeconomic resilience to natural disasters is essential for reducing ### Natural disaster vulnerability and resilience measures - Ecuador is highly vulnerable to droughts, wildfires, floods, and landslides, with increasing frequency and severity in recent decades (2024 Article IV Consultation Selected Issues Paper). - Consecutive historical droughts in 2023 and 2024 triggered electricity crises and severely disrupted economic activity. - Heavy rainfall in 2025 forced the closure of oil pipelines, causing a significant decline in oil output and affecting export and fiscal revenues. - Floods, landslides, and sea-level rise could erode infrastructures and cause route disruptions affecting economic activities and other critical services. - Authorities’ actions and recommendations: - Working to diversify the energy matrix and enhance preparedness for natural disasters. - Reform efforts to strengthen macroeconomic resilience to support productivity and growth. ### Governance in SOEs and hydrocarbon sector capacity - Completed audits: - Audits of the 2019 and 2020 financial statements of Petroecuador and Petroamazonas completed. - Audit of the 2021 financial statements of Petroecuador (first year after merger) completed in September (end-September 2025 SB, met). - Planned actions: - Launch a public tender to audit Petroecuador financial statements for 2022-2024 (proposed SB for end-February 2026). - Develop a roadmap to address 2021 audit findings by updating internal management regulations, internal control systems, and corporate governance. - Ambitious multi-year initiative to mobilize investments in the hydrocarbon sector, including increasing private sector participation; envisaged actions to boost oil production, enhance the oil refinery system, and promote the gas sector. ### Financial integrity, AML/CFT, and organized crime financing - Legal and institutional developments: - National Assembly approved an AML/CFT law in July 2024 that entered into force in July 2025, incorporating reforms in line with FATF standards. - Pending regulations to the AML/CFT law would strengthen financial integrity tools; effective implementation is key. - With IMF TA support, authorities are preparing an AML/CFT Strategic Action Plan to address pressing risks identified in the 2024 National Risk Assessment (end-September 2025 SB, proposed to be reset to end-January 2026). - Implementation priorities: - Establish a risk-based roadmap and a government-wide approach including coordination, information sharing, and joint action. - Strengthen the Financial Analysis Unit’s (UAFE) independence and capacity to generate and share financial intelligence. ### Transparency, anti-corruption, and procurement integrity - Authorities’ measures and requirements: - Strengthening procurement transparency, civil service integrity, and internal controls across public entities. - Ensure accuracy of beneficial ownership information of participants in procurement processes. - Comptroller General’s Office required high-ranking public officials (politically exposed persons) to submit updated sworn asset declarations in August 2025 in line with the new AML/CFT law. - Further priorities: - Sustain enforcement, continue to enhance the asset and interest declaration system introduced by the AML/CFT law, and pass legislation to prevent conflicts of interest in public administration. ### Program modalities, monitoring, and structural reform implementation - Performance and targets: - All QPCs for the third review have been met. - End-August IT on accumulation of NIR was met with a significant margin. - End-August IT on domestic arrears clearance was not met due to temporary financing delays; preliminary fiscal IT data suggest targets have been met (¶7). - Revised timeline and test dates: - New test date proposed for the fourth EFF review: end-October 2025 (availability date December 15). - Test date for the fifth review proposed to change from end-December 2025 to end-January 2026. - IT on domestic arrears’ clearance proposed to be reset to align with revised financing plans (¶8). - Structural reforms implemented or in progress: - Implemented an automated process for PGE payments (end-July 2025 SB, implemented with delay). - Enacted secondary regulations to allow private entities to sell surplus electricity from self-generation to the national grid in September (end-August 2025 SB, met). - Adopted transparent and cost-reflective pricing mechanisms with regular reviews for medium- and high-voltage tariffs (end-August 2025 SBs, met). - Completed audit of the 2021 financial statements of Petroecuador (end-September 2025 SBs, met). - Work advancing on: upgraded Official System of Public Procurement (SOCE) (end-July 2025 SB, not met); agreement between MEF and IESS to settle healthcare obligations (end-August 2025 SB, not met); AML/CFT strategic action plan (end-September 2025 SB, not met). - Proposed SB resets and new SBs: submit 2026 draft budget to the National Assembly (end-November 2025 SB); launch public tender to audit Petroecuador 2022-2024 (end-February 2026 SB); launch auctions for domestic market bonds and treasury notes (end-September 2026 SB); publish audited actuarial report for the social security system with data up to 2024 (end-December 2026 SB). ### Quantitative performance criteria and indicative targets (selected figures as presented) - Example table highlights (US$ million, unless otherwise indicated): - Nonoil primary balance of the budgetary central government (PGE) (floor): Program and Actual figures include -341, -341, 294 (Met) for End-Oct. 2025 (Proposed) and other staged values for subsequent dates. - Overall balance of the PGE and CFDD (floor): Program and Actual figures include -1,041, -1,181, -838 (Met) for End-Oct. 2025 (Proposed) and staged values thereafter. - Accumulation of NFPS deposits at the central bank (floor): Program and Actual include 0, -957, 423 (Met) for End-Oct. 2025 (Proposed), with subsequent values. - Stock of PGE arrears to the domestic private sector (ceiling): 600, 660 (Not Met) for End-Oct. 2025 (Proposed); 400, 480 (Not Met) for End-Jan. 2026 (Proposed); further values reported for later dates. - Number of families in the first three income deciles nationwide covered by cash transfer programs (floor): 1,228,660; 1,248,805 (Met) for End-Oct. 2025 (Proposed); staged increases in subsequent periods up to 1,317,012. ### Capacity to repay, financing assurances, and market access assumptions - Capacity to Repay: - Total Fund credit outstanding expected to peak in 2025, reaching 1032.8 percent of quota and 24.4 percent of exports (Table 9). - Total obligations to the Fund expected to reach 15.1 percent of gross reserves in 2025 and decline subsequently. - Fund obligations as a percentage of GDP and exports projected to peak at 1.3 and 4.4 percent in 2027. - Mitigating factors: decisive policy actions, continued strong commitment to program objectives, and strong track record under the EFF-supported arrangement. - Financing Assurances: - Program is fully financed, with firm financing commitments for the next 12 months and good prospects for the remaining program period (Table 6). - IFIs mentioned: WB, IDB, Development Bank of Latin America and the Caribbean (CAF), and Latin American Reserve Fund (FLAR) committed to maintain or increase support. - Market access assumptions: US$1 billion in 2026, US$1.5 billion in 2027, and US$2 billion in 2028 (described as more conservative than Ecuador’s average external bond issuances before the pandemic). - Contingency: alternative financing sources and/or contingent policy response required if financing shortfalls occur. ### Safeguards, arrears, capital flow management, and enterprise risks - Safeguards and central bank governance: - BCE implemented recommendations from the 2024 assessment, including a capacity-building plan for its accounting function and strengthened Audit Committee oversight. - COMYF amended to enhance BCE’s functional autonomy and expand special regulatory frameworks; budgetary autonomy strengthened. - Aligning transparency practices with international standards remains work in progress; full adoption of IFRS would require legal reform. - Lending into Arrears: - Residual arrears to international private bond holders from repudiated 2008-09 bonds: US$52 million remains outstanding in the hands of individual creditors. - Authorities established a public procedure to address requests for liquidation of these securities; staff judges authorities continue to make good faith efforts to reach collaborative agreement with remaining creditors. - Article VIII / CFMs: - Ecuador maintains a 5 percent tax on transfers abroad (“impuesto a la salida de divisas”, ISD) for financial and current international transactions. - The measure constitutes both an outflow CFM and an exchange restriction under Article VIII, Section 2(a). - Authorities committed to gradually phasing out the tax as stability is restored and the reserve position is strengthened. - ISD rate adjustments in 2025 cited: - ISD rate for a list of imports in the pharmaceutical sector reduced to 0 percent from 5 percent as of January 2025 for the year 2025. - ISD for a list of imports for other productive sectors temporarily reduced from 5 percent to 0 percent between January and April 2025, and reduced to 2.5 percent as of May 2025 for the remainder of 2025. - Enterprise risks and mitigants: - Significant business, operational, financial, and reputational risks related to the EFF arrangement persist. - Financial risks due to large adjustment needs and contingent repayment capacity on successful policy implementation and availability of external financing. - Other risks: uncertain economic outlook, global policy uncertainty, challenging security situation affecting mission presence, institutional capacity weaknesses and data lags/variability. - Important mitigants: bold policy actions taken by authorities; strong program implementation since approval (including meeting all QPCs, many with significant margins); stronger mandate in National Assembly; strong multilateral support; commitment to honor external debt obligations; increased social safety nets; contingency planning with triggers. ### Assessment of Exceptional Access Criteria (Box 1) - Criterion 1: - Staff assesses criterion met: Ecuador experiencing exceptional BoP need from large external debt repayments and loss of market access. - Ecuador’s credit outstanding with the Fund stands at SDR6.6 billion (US$9.1 billion, or 948 percent of quota) as of end-September 2025, requiring exceptional access. - Criterion 2: - Staff assesses criterion met: Debt sustainability assessment continues to assess public debt as sustainable but not with high probability. - Adequate safeguards assessed to remain in place to meet EA Criterion 2 should adverse shocks materialize. - Two tests under the Fund’s Debt Sustainability Framework for Market Access Countries: - Debt Sustainability Test: staff assesses condition met—public debt would remain sustainable in the face of a large shock at the end of the program period. - FX Availability Test: analysis examined whether Ecuador would have sufficient FX liquidity to manage international obligations after such a shock under plausible assumptions; (analysis detailed in Annex III). *Source: IMF staff report text provided in the content unit.* ### Box 1. Assessment of Exceptional Access Criteria (concluded) ### Box 1. Assessment of Exceptional Access Criteria (concluded) ### Exceptional access criteria: summary of staff assessment - Criterion 3 – Prospects of regaining market access - Staff assesses that this criterion is met. - Sovereign spreads remain elevated, but they have declined by over 1,000 basis points since the April 2025 elections. - Ecuador had regularly issued international bonds until 2019, providing reasonable prospects for external debt issuance in a context of gradual macroeconomic improvement and robust policy reforms under the EFF arrangement. - Since 2019, the authorities implemented a nimble debt management strategy, including a guaranteed bond in 2020 and two successful debt-for-nature swaps in 2023 and 2024, respectively. - Staff judges that robust implementation of the EFF-supported plan (with ambitious fiscal consolidation, structural reforms, and buffers), the continued strong commitment to remain current on external debt obligations, and adherence to a sustainable and firmly declining debt path consistent with achieving COPLAFIP’s debt ceilings ahead of schedule will help Ecuador bolster market confidence, further lower sovereign spreads, and re-access international markets as envisaged under the program’s baseline. - Assessment is subject to significant risks and depends on steadfast implementation of the authorities’ fiscal and reform plans as well as global economic and financial conditions. - Criterion 4 – Prospect of program success (implementation capacity) - Staff assesses that this criterion is met. - In April 2025, President Noboa won reelection and forged a working majority in the National Assembly. - The authorities remain fully committed to the objectives of the program and are implementing policies to ensure its success. - All QPCs for end-August 2025 have been met, and the authorities have completed several and are advancing other SBs envisaged under the program. - The government has demonstrated capacity to implement needed reforms to address longstanding fiscal and macroeconomic challenges under very difficult circumstances and strong ownership of the broader objectives of the program. - The assessment remains subject to risks related to the challenging domestic and global economic environment and Ecuador’s longstanding socio-political complexities. ### Staff appraisal: macroeconomic and program implementation findings - Implementation and reform progress - The authorities have made impressive progress in implementing their economic program under the EFF arrangement. - Enacted bold policy measures to increase nonoil revenue, align domestic fuel prices with international prices, and strengthen fiscal and external buffers, with continued efforts to protect vulnerable populations. - All quantitative performance criteria and most indicative targets for the third EFF review have been met, many with significant margins. - Notable progress achieved in the structural reform agenda, including fiscal, governance, and growth-oriented structural benchmarks. - Macroeconomic outlook and recent performance - The economy is recovering faster than expected, alongside low inflation and a high current account surplus. - Real GDP rebounded strongly in the first half of the year, driven by a recovery in private consumption and investment and record non-oil exports. - Temporary disruption of oil production due to heavy rains in July has been resolved. - Real GDP growth is projected at 3.2 percent for 2025, significantly above the previous estimate of 1.7 percent at the second EFF review. - The 2024 external position is assessed as broadly in line with fundamentals and desirable policies. - The current account balance is expected to continue posting steady surpluses over the medium term, contributing to a stronger build-up of international reserve buffers relative to projections at the second review. - Inflation is expected to remain low and below levels in trading partner economies. - Risks and risk mitigation - Elevated risks remain but are mitigated by effective program implementation and ongoing structural reforms. - Key vulnerabilities: improving but still low reserves and liquidity buffers, a large envisaged fiscal consolidation, and potential delays in securing external financing and regaining market access. - Continued strong program performance and commitment to reforms help ease these risks by reducing funding needs, building buffers, and supporting growth. - The authorities’ strong policy actions demonstrate a strong commitment to stabilizing public finances and regaining market access. - Progress with economic reforms could deliver notably stronger job-rich growth and economic diversification over the medium term. ### Fiscal policy, debt, and financing - Fiscal measures and social protection - Substantial measures are being implemented to boost fiscal revenues and improve the targeting and efficiency of public expenditure, while protecting vulnerable groups. - Authorities are implementing substantial high-quality measures to permanently increase fiscal revenues, support expenditure rationalization, and enhance procurement efficiency. - Continued enhancement of the social safety net: implementing compensatory measures to mitigate the impact of reforms on vulnerable groups and expanding coverage of cash transfer programs to low-income families ahead of program targets. - Fiscal outlook and debt trajectory - Authorities remain committed to continue strengthening the fiscal position and place public finances on a sustainable path. - NFPS overall deficit projected to decline to 1.2 percent of GDP in 2025, from 1.3 percent of GDP in 2024. - The medium-term fiscal plan envisages a fiscal consolidation of 6.6 percent of GDP in the NOPBS over the program period, in line with the second review. - Public debt is placed on a firm downward path and on track to achieve the COPLAFIP target of 40 percent of GDP by 2031, one year ahead of schedule. - Sovereign debt spreads have declined by over 1,000 basis points since the April presidential elections. - Continued progress on economic reforms and buildup of liquidity buffers are expected to further narrow spreads and restore Ecuador’s market access. - Timely support from IFIs and bilateral creditors to maintain or increase their credit exposures is important to ensure that the program remains fully financed. ### Financial sector and domestic capital markets - Financial stability and policy tools - The financial sector has remained stable, with better credit and soundness indicators. - COMYF changes should enhance policy coordination and international liquidity management and will also facilitate a more integrated macro-prudential policy approach. - Strengthening regulation, oversight, and resolution tools, and taking steps to reform the interest rate system will further support stability and improve credit allocation and growth. - Developing domestic capital markets will also promote growth. ### Structural reforms, competitiveness, and governance - Structural reform priorities and growth prospects - Advancing structural reforms is important to boost competitiveness and job-rich growth. - Authorities are working to attract private investment into high potential sectors such as mining, hydrocarbons, and energy. - Efforts underway to strengthen energy resilience by increasing electricity supply, diversifying the energy matrix, and building resilience to natural disasters. - Decisively advancing the economic reform agenda could realize significant growth dividends over the medium term. - Governance, AML/CFT, and crime reduction - Combating illicit activities and enhancing governance will support growth. - Effective AML/CFT measures and a strategic action plan aim to curb organized crime financing. - Authorities are implementing initiatives to strengthen procurement governance, focusing on increasing transparency and efficiency. - Continued efforts to reduce crime and strengthen governance are key for enhancing the investment environment and boosting growth. *Source: Box 1. Assessment of Exceptional Access Criteria (concluded), IMF staff appraisal (as presented in the provided content).* ### 48. Staff supports the completion of the third review and the rephasing of the test dates ### 1ecuea2025002-source-pdf - 48. Staff supports the completion of the third review and the rephasing of the test dates ### Staff recommendation and program implementation - Staff supports the completion of the third review and the rephasing of the test dates for the fourth and fifth reviews. - Staff recommends the completion of the financing assurances review. ### Recent economic developments (first half of 2025 and high-frequency indicators) - The economy "bounced back in the first half of 2025, driven by stronger domestic demand and record nonoil exports" with "broad-based growth across sectors." - High-frequency indicators point to continued strong nonoil activity in 2025Q3 (local sales, vehicle sales, electricity supply, credit from private banks shown positive yoy). - Oil sector dynamics: - "Oil production recovered after the July disruptions in the main pipelines and refinery." - Oil production time series shown up to "National Total" and "ITT: Block 43 (RHS)" with series ending "27-Sep-25" (charted in thousands of barrels per day). - Inflation: - "Inflation remains subdued.... even after the normalization of electricity prices." - Headline and Core 1/ inflation series charted through "Sep-25." ### Fiscal developments (2024–2025) - Fiscal position strengthened in 2024: "the fiscal deficit declining significantly ... supporting the rebuilding of fiscal buffers." - Financing mix in 2024 "relied on support from multilateral partners." - "Successful revenue mobilization was achieved with the authorities’ fiscal package in 2024... while primary expenditures remained contained." - Despite fiscal improvement, "gross financing needs remained large." - Sovereign spreads: "Sovereign spreads have narrowed substantially since the April 2025 election." - Key fiscal numbers (Table 3a, NFPS, US$ million): - Revenue (2024): "43,580"; (2025): "45,876"; projections through 2030 listed up to "58,189". - Oil revenue (2024): "14,510"; (2025): "14,847". - Nonoil revenue (2024): "29,070"; (2025): "31,029". - Expenditure (2024): "47,797"; (2025): "47,467". - Net lending/borrowing (NLB = 1-2) (2024): "-4,217"; (2025): "-1,590"; projections through 2030 include values such as "1,152" (2028), "1,829" (2029), "1,992" (2030). - NFPS gross debt (US$ million): 2024 "65,821"; 2025 "67,019"; projections through 2030 ending at "67,910". - Fiscal balances (percent of GDP, Table 3b): - Revenue (2024): "36.0"; (2025): "36.8". - Expenditure (2024): "39.5"; (2025): "38.1". - NFPS gross debt (percent of GDP): 2024 "54.3"; 2025 "53.8". ### External sector and reserves - Trade and current account: - Imports increased with the recovery, "which were more than compensated by strong export growth... especially for nonoil products," supporting "a record current account surplus." - Current account (US$ million, Table 5a): 2024 "2,351"; 2025 "7,082"; 2026 "7,068"; projections through 2030 include values such as "4,404" (2030). - Current account (percent of GDP, Table 5b): 2024 "1.9"; 2025 "5.7"; 2026 "5.7"; projections decline toward "2.8" (2030). - Exports and imports (US$ million, Table 5a): - Exports, f.o.b. 2024 "31,484"; 2025 "34,699"; projected 2026 "34,699". - Oil exports 2024 "8,952"; 2025 "9,572". - Nonoil exports 2024 "22,532"; 2025 "25,127". - Imports, f.o.b. 2024 "29,277"; 2025 "27,886". - Gross international reserves (US$ million, Table 5a and Table 7): - 2024 "4,455"; 2025 "6,900"; 2026 "6,908". - Projection path through 2030 includes "25,972" (2030). - Reserves as a percent of the ARA metric (excluding Liquidity Fund): 2024 "17.0"; 2025 "26.1"; 2026 "26.1". - Balance of payments and financing: - Financial account (US$ million, Table 5a): 2024 "4,596"; 2025 "5,093"; 2026 "5,261". - Public sector disbursements and amortizations detailed (multilaterals, bilaterals, commercial, securities), e.g., multilateral disbursements 2024 "1,581"; 2025 "4,268". ### External position and competitiveness - Terms of trade: "Despite lower oil prices, the terms of trade fell only by 1.6 percent in 2025." - Offset factors: "Lower oil prices were offset by higher prices of cocoa (+1.9 pp) and gold (+1.0 pp) ... and by the lower cost of imported oil derivatives." - External position assessment: "The CA has been in surplus since 2020 and the 2024 external position is assessed to be in line with the level implied by fundamentals and desirable policies." - Real effective exchange rate (REER): "The real effective exchange rate has been stable since 2023 and depreciated slightly in 2025H1." - Competitiveness supported by "lower inflation in Ecuador than in trading partners." ### Financial system developments and stability - Deposit and credit dynamics: - "Robust deposit growth facilitated an incipient rise in credit growth." - Deposit growth strong for private banks and cooperatives (charts through Aug-25). - Credit growth "is leveling up, led by productive credit." - Across institutions: credit by private banks is accelerating; credit by public banks has declined; cooperatives’ credit is resuming positive growth. - Interest rates and borrowing costs: - "A decline in borrowing costs" shown in interest rate series (deposit, lending, margin) through Aug-25. - Banking soundness indicators (Table 8, percent, end of period or monthly): - Regulatory capital to risk-weighted assets: 2019 "14.7"; 2024 "15.0"; Jan-25 through Jul-25 values around "14.6-14.7". - Nonperforming loans to total gross loans (banking system): 2019 "3.2"; 2024 "4.8"; Jan-25 to Jul-25 values range "5.0-4.8". - Provisions to nonperforming loans: 2019 "186.6"; 2024 "154.5"; Jan-25 to Jul-25 around "156.2-152.0". - Return on assets: 2019 "2.1"; 2024 "1.5"; Jan-25 to Jul-25 around "1.4". - Capital adequacy and solvency: "Solvency ratios have stabilized above the regulatory norm." - Liquidity and reserves: - Bank reserves remain adequate despite a decline since end-2024. - Selected liquidity indicators show bank reserves at the BCE/deposits and liquid assets/ST deposits (private banks aggregate) through Aug-25. - Credit quality and forbearance: - "The restructured and refinanced share of credit remains stable, with notable improvement in public banks." - Provisioning remained adequate and loan quality "improved marginally since end-2024." ### Labor market and socio-economic developments - Employment and labor metrics: - "Formal private employment has returned to pre-pandemic levels." - "Rising adequate employment, especially among the youth." - Unemployment: "The unemployment rate is in single digits, with declining youth employment." - Informality: "Informality is declining, particularly among the youth." - Labor force participation "sees an uptick in recent months." - Poverty: - "Poverty has decreased recently, especially in urban areas." - Selected labor series (charts): - Public and private formal employment (thousands affiliated with Social Security) charted through Aug-25. - Adequate vs. inadequate employment shares, unemployment (total and youth 15-24), employment by sector (formal/informal), labor force participation (total/men/women), and poverty rate (national/urban/rural) all charted through dates up to Aug-25 or Dec-24 as indicated. ### Key macroeconomic projections and indicators (selected) - Real GDP growth (percent change, Table 1 / Table 2): - 2023 "2.0"; 2024 "-2.0"; 2025 "-2.0"; 2026 "1.7"; 2027 "3.2"; 2028 "2.1"; 2029 "2.0"; 2030 "2.4" (Table 1 shows a sequence; Table 2 repeats key values). - Nominal GDP (US$ million, Table 1 / Table 2): - 2023 "121,147"; 2024 "124,676"; 2025 "124,676"; 2026 "129,139"; projections to 2030 up to "159,376". - Consumer price index (period average and end-of-period, Table 1 / Table 2): - CPI period average 2024 "2.2"; 2025 "1.5"; projections through 2030 include "1.5". - CPI end-of-period 2024 "1.3"; 2025 "0.5"; projections through 2030 include "1.5". - Oil production and prices (Table 1 / Table 2): - Oil production (millions of barrels): 2023 "173.5"; 2024 "174.0"; 2025 "174.0"; 2026 "173.0"; 2027 "161.0"; projected through 2030 up to "175.3". - Oil price WTI (US$ per barrel): 2023 "77.6"; 2024 "76.6"; 2025 "76.6"; 2026 "66.1"; 2027 "66.5"; projections vary up to "63.4" by 2030. - Current account and gross financing metrics: - Current account (percent of GDP, Table 1): 2024 "1.9"; 2025 "5.7"; 2026 "5.7"; 2027 "4.7"; 2028 "5.1"; projections declining to "2.8" in 2030. - Gross financing needs (percent of GDP, Table 4): 2023 "8.1"; 2024 "8.5"; 2025 "8.5"; 2026 "6.4"; 2027 "6.3"; 2028 "5.3"; 2029 "5.4"; 2030 "4.0". - Monetary and financial aggregates (Table 7): - Broad money (M2) percent change yoy: 2023 "6.7"; 2024 "4.8"; 2025 "4.8"; projections range to "4.6" (2030). - Credit to private sector percent change yoy: 2023 "8.4"; 2024 "6.2"; 2025 "6.2"; projections through 2030 include "5.8". - Net international reserves (US$ million, program definition, Table 1 note 9): 2024 "-7,639"; 2025 "-7,638"; 2026 "-7,638"; projections improve to "4,996" (2030). ### Program timing and IMF engagement - Schedule of IMF purchases, reviews and proposed adjustments (Table 10a / 10b): - Approval of arrangement: May 31, 2024, "752.9" million SDRs (107.9 percent of quota). - First review: November 15, 2024, "375.9" million SDRs (53.9 percent of quota). - Second review: March 15, 2025, "438.4" million SDRs (62.8 percent of quota). - Third review: August 15, 2025, "438.4" million SDRs (62.8 percent of quota). - Proposed adjustments and subsequent reviews listed with exact dates and SDR amounts, total purchases "3,750.4" million SDRs (537.5 percent of quota). - Indicators of Fund credit (Table 9): - Stock of existing and prospective Fund credit (SDR million): 2023 "5,925"; 2024 "6,650"; 2025 "6,650"; projected decline through 2034 to "748". - Disbursements under the EFF and related schedule detailed (e.g., "1,129" disbursement entries). ### Policy implications and priorities (as reflected in the document) - Complete program review milestones and rephase test dates to reflect operational and data realities: "Staff supports the completion of the third review and the rephasing of the test dates for the fourth and fifth reviews." - Complete the financing assurances review to underpin external financing and program credibility. - Continue to rebuild fiscal buffers through revenue mobilization and contained primary expenditures, given the strengthened fiscal position in 2024 and remaining large gross financing needs. - Maintain reserve adequacy and external financing plans given large public and private amortization schedules and the projected path of gross international reserves. - Monitor banking sector liquidity, credit growth, and NPL trends while preserving adequate provisioning and capital buffers, given improved deposits, rising credit, and stabilizing solvency ratios. *Source: Excerpts from 1ecuea2025002-source-pdf (Ecuador IMF staff report content provided).* ### 1. Nonoil primary balance of the budgetary central government (PGE) (floor) 1/ ### 1ecuea2025002-source-pdf - 1. Nonoil primary balance of the budgetary central government (PGE) (floor) 1/ ### Performance criteria and indicative targets (selected outcomes and targets) - Nonoil primary balance of the budgetary central government (PGE) (floor) — cumulative from January 1: - Reported series line: -341 -341 294 Met -1,220 -1,220 -295 Met -1,255 -875 -302 -1,310 - Overall balance of the PGE and CFDD (floor): - Reported series line: -1,041 -1,181 -838 Met -2,628 -2,617 -2,206 Met -3,565 -1,229 -1,341 -2,624 - Accumulation of NFPS deposits at the central bank (floor): - Reported series line: 0 -957 423 Met 0 -1,063 243 Met 243 100 200 645 - Non-accumulation of external payments arrears by the NFPS (continuous performance criterion): - Reported series line: 0 0 Met 0 0 Met 0 0 0 0 - (No new) Central bank direct and indirect financing to the NFPS (continuous performance criterion): - Reported series line: 0 0 Met 0 0 Met 0 0 0 0 Indicative targets: - Overall balance of the NFPS (floor): - Reported series line: -89 -229 644 Met -1,103 -1,092 -1,023 -667 217 -46 - Nonoil primary balance including fuel subsidies (NOPBS) of the NFPS (floor): - Reported series line: -1,151 -1,011 -379 Met -3,070 -3,081 -3,798 -1,513 -1,317 -3,434 - Change in the stock of NIR (floor): - Reported series line: -34 -991 828 Met -574 -1,637 817 Met -125 -260 315 963 - Stock of PGE arrears to the domestic private sector (ceiling): - Reported series line: 600 660 Not Met 400 480 Not Met 480 330 210 105 - Number of families in the first three income deciles nationwide covered by cash transfer programs (floor): - Reported series line: 1,228,660 1,248,805 Met 1,244,336 1,257,351 Met 1,260,012 1,283,012 1,289,012 1,317,012 - Notes attached to targets: - Sources: Ministry of Economy and Finance and IMF staff estimates. - Note: Aggregates and adjustors as defined in the Technical Memorandum of Understanding (TMU). - 1/ Cumulative from January 1 unless otherwise indicated. - 2/ Cumulative from November 1, 2025 to January 31, 2026 for targets 1 through 8; end-January 2026 targets for targets 9 and 10. - 3/ Staff report for the Second EFF Review (Country Report No. 25/199). - 4/ Adjusted for oil prices and disbursements from multilateral institutions. - Reporting dates shown: End-April 2025, End-Aug. 2025. ### Structural benchmarks (summary of reforms, objectives, due dates, and status) - Public Financial Management: - 1. Publish an updated Medium-Term Fiscal Framework (MTFF) in line with program targets. - Objective: Strengthen fiscal planning and management. - Due Date: End-October 2024. - Status: Met. - 2. Publish a Medium-Term Debt Management Strategy in line with program targets. - Objective: Strengthen fiscal planning and management. - Due Date: End-October 2024. - Status: Met. - 3. Implement an automatized process for budgetary central government (PGE) payments, including arrears’ payments. - Objective: Strengthen financial management, increase transparency, and reduce accumulation of payment arrears. - Due Date: End-July 2025. - Status: Not Met. Implemented with delay. - Domestic Arrears: - 4. Share with Fund staff an updated plan to clear and prevent the resurgence of domestic arrears of the PGE, including obligations to the private sector and intra-public sector claims. - Objective: Strengthen the monitoring and reduce accumulation of payment arrears. - Due Date: End-November 2024. - Status: Met. - Tax Reform: - 5. Prepare and share with the Fund a plan to mobilize nonoil fiscal revenues, including by streamlining inefficient tax expenditures and replacing transitory revenue measures with permanent high-quality ones. - Objective: Inform future efforts to broaden the tax base and streamline tax expenditures. - Due Date: Mid-November 2024. - Status: Met. - Fiscal Strategy: - 6. Enact regulation on revenue and/or expenditure measures to ensure that the 2025 fiscal plan is in line with program and MTFF commitments. - Objective: Ensure fiscal consolidation. - Due Date: December 6, 2024. - Status: Met. - Social Safety Net: - 7. Share with the Fund a plan to complete the social registry to cover families in the lowest three deciles of the income distribution throughout the country. - Objective: Enhance the social safety net. - Due Date: End-October 2024. - Status: Met. - Governance and Transparency (selection): - 8. Establish an updated agreement between the MEF and IESS on the transfer of healthcare obligations (including both internal and external providers), building on the December 2022 agreement. Include a decision about the 2022 healthcare audits. - Objective: Improve expenditure control. - Due Date: End-August 2025. - Status: Not met. Proposed to be reset for end-November 2025. - 9. Establish a timeline to operationalize the National Control Subsystem (SNC) to increase transparency in procurement. - Objective: Strengthen anticorruption framework and improve expenditure control. - Due Date: End-December 2024. - Status: Met. - 10. Prepare and share with the Fund the conceptual and operational framework for an upgraded Official System of Public Procurement (SOCE). - Objective: Increase transparency and efficiency in procurement and improve expenditure control. - Due Date: End-July 2025. - Status: Not met. Proposed to be reset to end-December 2025. - 11. Initiate the tender process to select an auditor to undertake the 2023 and 2024 healthcare audits (based on the updated MEF/IESS agreement). - Objective: Improve the quality and reliability of fiscal data. - Due Date: End-December 2024. - Status: Met. - 12. Complete the audits of the 2019 and 2020 financial statements of Petroecuador and Petroamazonas and share the results with Fund staff. - Objective: Enhance transparency and governance in the oil sector. - Due Date: End-March 2025. - Status: Met. - Anti-Money Laundering Framework: - 13. Enact new AML/CFT legislation to strengthen the AML/CFT framework in line with FATF standards. - Objective: Mitigate the risk of illicit flows including those related to organized crimes. - Due Date: End-February 2025. - Status: Met. - 14. The National AML/CFT Coordination Committee to approve and publish a summarized version of an AML/CFT Strategic Action Plan, establishing actionable policy priorities to mitigate money laundering and terrorist financing risks identified in the National Risk Assessment approved in 2024. - Objective: Mitigate the risk of illicit flows, including those related to organized crimes. - Due Date: End-September 2025. - Status: Not met. Proposed to be reset to End-January 2026. - Financial Sector and Domestic Capital Market (selection): - 15. Establish a Financial Stability Committee in line with best international practices, comprising the BCE, MEF, JPRF, JPRM, SB, SEPS, SCVS, and COSEDE. - Objective: Enhance coordination among agencies involved in financial sector oversight. - Due Date: End-September 2024. - Status: Met. - 16. Establish an inter-institutional group within the Financial Stability Committee to coordinate resolution reforms and strategies. - Objective: Strengthen financial sector resolution framework. - Due Date: End-January 2025. - Status: Met. - 17. Issue macroprudential regulations on bank capital buffers, including surcharges on systemically important institutions and a countercyclical capital buffer. - Objective: Strengthen financial sector buffers. - Due Date: End-November 2024. - Status: Met. - 18. Prepare and share with Fund staff a study of the system of interest rates, including recommendations to improve credit allocation, financial inclusion, and economic growth, while preserving financial stability. - Objective: Foster financial sector deepening and improve economy’s growth potential. - Due Date: End-March 2025. - Status: Not met. Implemented with delay. - 19. Sign a contract to implement a new platform for the BCE’s central securities depository (DCV) to modernize compensation, liquidation, and custody functions. - Objective: Foster domestic capital market development. - Due Date: End-January 2025. - Status: Not met. Implemented with delay. - 20. Issue regulation for domestic market auctions for bonds and treasury notes, including procedures, auction format, and rules for participation, bidding, and allocation. - Objective: Foster domestic capital market development. - Due Date: End-November 2025. - Status: (no status reported in excerpt). - Sectoral and other benchmarks (selection of later due dates and proposed items): - 21. Implement the regulation for the opening of the mining cadaster. - Due Date: End-June 2026. - Status: (no status reported). - 22. Develop a new fiscal regime for the mining sector to enhance efficiency and revenue potential. - Due Date: End-December 2025. - Status: (no status reported). - 23. Complete the audit of the 2021 financial statements of Petroecuador and share the results with IMF staff. - Due Date: End-September 2025. - Status: Met. - 24. Enact secondary regulations under existing electricity laws to allow private entities to sell surplus electricity from self-generation to the national grid. - Due Date: End-August 2025. - Status: Met. - 25. Adopt a transparent and cost-reflective pricing mechanism, with regular reviews, for medium- and high-voltage electricity tariffs, in line with gradually reducing energy subsidies. - Due Date: End-August 2025. - Status: Met. - 26. Launch auctions for domestic market bonds and treasury notes. - Due Date: End-September 2026. - Status: Proposed. - 27. Submit a draft 2026 budget to the National Assembly in line with the EFF fiscal program. - Due Date: End-November 2025. - Status: Proposed. - 28. Launch a public tender to audit the financial statements of Petroecuador for 2022-2024. - Due Date: End-February 2026. - Status: Proposed. - 29. Publish an audited actuarial report for the social security system with data up to 2024. - Due Date: End-December 2026. - Status: Proposed. ### External sector assessment — key findings and indicators - Overall assessment: - "The external position of Ecuador in 2024 was broadly in line with the level implied by fundamentals and desirable policies." - The current account (CA) balance strengthened in 2024 due to robust nonoil exports and contraction in imports. The trade surplus remained elevated in 2025, supported by resilient nonoil exports. Foreign international reserves continue increasing though remain below adequacy levels. - Potential policy responses: - Authorities’ fiscal consolidation plan will allow gradual reserve buffer accumulation, reducing external vulnerabilities. - Continued implementation of structural reforms under the EFF-supported program will enhance growth, competitiveness, and private investment, supporting the external position. - Foreign assets and liabilities (2024): - NIIP: -12.9 percent of GDP. - Gross Assets: 58.3 percent of GDP. - Debt Assets: 52.7 percent of GDP. - Gross Liabilities: 71.2 percent of GDP. - Debt Liabilities: 56.6 percent of GDP. - Current account: - CA surplus widened to 5.7 percent of GDP in 2024 (2021-23 average: 2.2 percent). - Remittances inflows: 4.7 percent of GDP in 2024. - Available data through August 2025 shows continued strength in the trade surplus. - EBA-Lite CA model: - Cyclically adjusted CA norm: 2.8 percent of GDP. - Adjusted CA surplus: 3.8 percent of GDP. - Implied positive CA gap: 1.0 percent of GDP. - EBA-Lite consumption module (intergenerational equity): - CA gap: 0.7 percent of GDP. - Consumption model taken as reference for overall assessment. - Real Exchange Rate (REER) and terms of trade: - REER remained broadly stable in 2024; depreciated slightly in 2025 due to nominal USD depreciation. - Terms of trade projected decline by 1.6 percent in 2025, offset by higher cocoa and gold export prices and lower cost of imported oil derivatives. - EBA-Lite REER model identifies a positive REER gap of about 7.5 percent for 2024, pointing to a moderate overvaluation. - Capital and financial accounts: - Net capital inflows declined in 2024 due to higher net private portfolio and other investment outflows and stable FDI (0.3 percent of GDP). - Public financial inflows increased on the back of larger multilateral disbursements. - Assessment: Fiscal consolidation and reforms expected to help Ecuador regain access to international markets and support gradual recovery in private flows. - Model estimates for 2024 (selected): - CA-Actual: 5.7 (percent of GDP). - Cyclical contributions (from model): (-) 0.8. - Natural disasters and conflicts: (-) 1.1. - Adjusted CA: 3.8 (percent of GDP). - CA Norm (from model) 2/: 2.8. - Adjusted CA Norm: 2.8. - CA Gap: 1.0 (percent of GDP) under CA model; -1.4 under REER model; 0.7 under Consumption model. - o/w Relative policy gap: -0.9. - Elasticity: -0.2. - REER Gap (in percent): -5.6 under CA model, 7.5 under REER model, -4.1 under Consumption model. - Capital Flow Management Measures: - Ecuador maintains a tax on transfers abroad (ISD) for current and financial transactions; constitutes a CFM under the Fund’s Institutional View and an exchange restriction subject to approval under Article VIII. - Authorities committed to gradually phasing out this tax as balance of payments stability is restored and FX reserves increase. - ISD rate for imports of certain items was reduced in January 2025. - FX intervention and reserves: - Gross international reserves (GIR) recovered to US$ 6.9 billion at end-2024. - GIR increased to US$ 8.3bn as of September 2025. - At end-2024, gross reserves constituted 26 percent of the IMF’s reserve adequacy metric (ARA metric), or 31 percent of the adjusted ARA metric for countries with CFMs. - Other liquid resources at end-2024: Liquidity Fund equivalent to 16 percent of the ARA metric; liquidity net foreign assets (NFA) of the domestic financial system equivalent to 28 percent of the ARA metric. - Including these buffers, Ecuador’s liquid resources were equivalent to 71 percent of the ARA metric in 2024, still below adequate levels. - Additional liquidity facilities: FIMA repo facility with the Federal Reserve Bank of New York (FRBNY), liquidity lines with the Bank of International Settlements (BIS) and the Latin American Reserve Fund (FLAR). *Sources: Ministry of Economy and Finance; BCE; INS; IMF staff calculations; Technical Memorandum of Understanding (TMU); Staff report for the Second EFF Review (Country Report No. 25/199).* ### Annex II. Risk Assessment Matrix ### Annex II. Risk Assessment Matrix ### Global Conjunctural Risks - Escalating Trade Measures and Prolonged Uncertainty - Relative Likelihood: High - Possible Impact: Medium - Key points: Rising trade barriers and prolonged policy uncertainty could reduce trade, investment, and growth; inflationary pressures may re-emerge; effects amplified by strategic complementarities, global value chain bottlenecks, or inventory overhang; impacts on Ecuador include reductions in trade volumes of nonoil products (such as bananas or shrimps) and effects via commodity prices (in particular, oil). - Policy Response: Adopt policies that improve the resilience of trading relationships, including by removing trade barriers; fostering free trade agreements; and limiting policy uncertainty through clearly articulated medium-term policy frameworks. In the event tensions reduce oil prices, implement fiscal contingency measures. - Fiscal Vulnerabilities and Higher Long-Term Interest Rates - Relative Likelihood: High - Possible Impact: High - Key points: Rising public debt and deficit levels may put upward pressure on long-term interest rates, increase risk of sovereign bond market disruptions, amplify capital flow volatility, tighten financial conditions, threaten sovereign debt sustainability, and trigger global spillovers; market imbalances could emerge if major economies are affected. - Policy Response: Strengthen (financial) crisis preparedness and management. Continue to address financing needs by closely working with international financial institutions and seek opportune times to re-access international markets. Pursue fiscal consolidation to rebuild credibility with markets. - Financial Market Volatility and Correction - Relative Likelihood: High - Possible Impact: Medium - Key points: Stretched asset valuations, easy financial conditions, subdued volatility could be disrupted by sudden shifts in investor sentiment or policy stance; elevated leverage among Non-Bank Financial Intermediaries and rapid growth of unregulated crypto markets add vulnerabilities; abrupt market movements could hit Ecuador via higher funding costs and negative spillovers from lower growth in trading partners and lower commodity prices. - Policy Response: Continue stepping up financial supervision, including by imposing capital restoration plans on troubled institutions. Strengthen financial crisis preparedness and management. - Geopolitical Tensions - Relative Likelihood: High - Possible Impact: Medium - Key points: Intensification of conflicts and weakening multilateralism may trigger commodity price volatility, increase migration pressures, reignite inflation, and weigh on growth by undermining confidence, investment, tourism, trade, and supply chains; difficulties finding new markets can reduce trade flows; higher oil and metal prices expected to have a net positive impact on Ecuador’s external and fiscal balances. - Policy Response: Gradually reduce dependency on oil through economic diversification and promote private sector-led growth. Continue to diversify export markets through new high standard regional free trade agreements. - Commodity Price Volatility - Relative Likelihood: High - Possible Impact: High - Key points: Shifts in supply and demand—driven by geopolitical tensions, OPEC+ actions, or the green transition—may fuel commodity price swings, intensify external and fiscal pressures, social unrest, and macroeconomic instability; uncertainty on commodity prices will affect investment and economic activity; tightening financial conditions will lead to higher funding costs for banks and non-financial corporations; fluctuations impact the fiscal sector and Ecuador’s balance of payments. - Policy Response: Pursue fiscal consolidation to restore confidence and ensure debt and fiscal sustainability. Gradually reduce dependency on oil through economic diversification and promote private sector-led growth. Continue to closely monitor financial sector stability. Continue to address financing needs by closely working with IFIs and wait for an opportune time to re-access international markets. - New Trade Agreements - Relative Likelihood: Low - Possible Impact: Medium - Key points: A breakthrough in trade talks could reduce uncertainty and protectionism, boost investment and productivity, and support broader reforms to lift medium-term growth; potential direct trade effects through China, the U.S. and Europe and indirect effects from a wider growth pickup. - Policy Response: Diversify the economy to reduce dependency on commodity exports and take advantage of a growth pick-up more broadly. Continue to diversify export markets through new high standard regional free trade agreements. ### Structural Risks - Cyberthreats - Relative Likelihood: High - Possible Impact: High - Key points: Cyberattacks on physical or digital infrastructure (including digital currency and crypto assets), technical failures, or misuse of AI technologies could trigger financial and economic instability; attacks on critical infrastructures (including through state-owned enterprises) could jeopardize operational, energy, financial, and economic stability and imply serious costs. - Policy Response: Ensure critical systems are properly protected and backup systems are available. Insurance could help mitigate some of the fiscal risk. - Labor Supply Gaps - Relative Likelihood: (not specified for high/low in text heading; table indicates Medium) - Possible Impact: Low - Key points: Tighter restrictions to migration could worsen labor shortages in aging economies, reducing potential output, fueling inflation, and straining fiscal balances through lower revenues; labor mobility curbs could hit Ecuador through lower remittances. - Policy Response: Enhance the coverage of the social safety net to protect the most vulnerable segments of the population. ### Domestic Risks - Prolonged or Deeper Security Crisis - Relative Likelihood: Medium - Possible Impact: High - Key points: Renewed flare-up in domestic violence causing curfews and disruptions would lower domestic activity, tourism, and fiscal revenue, and deter long-term investment. - Policy Response: Ensure adequate fiscal spending on security through adequate prioritization. Implement contingency fiscal measures to ensure fiscal sustainability is not undermined. Implement targeted measures to support the most vulnerable. Advance governance, AML/CFT, and inclusive growth agenda. - Renewed Political Impasse - Relative Likelihood: Medium - Possible Impact: High - Key points: Government unable to complete reform agenda due to faltering political and public support could lead to lack of access to international financing, lower investment, and further build-up of arrears. - Policy Response: Design reforms such that the fiscal adjustment does not hurt vulnerable groups. Continue engaging the broader public, explaining the benefits of the reform program. Prioritize social spending to achieve more inclusive and job-rich growth. - Unexpected and Large Disruptions in Oil Production - Relative Likelihood: Medium - Possible Impact: High - Key points: Repeated and long disruptions to oil production owing to natural disasters and lack of maintenance could reduce oil production and exports, lower fiscal revenue, lead to further liquidity constraints for the government and additional build-up in arrears. - Policy Response: Invest in maintenance and resilience of oil infrastructure. Advance the diversification and SOE governance agendas. - Rising Social Discontent - Relative Likelihood: Medium - Possible Impact: High - Key points: High living costs, weak growth, and inequality may fuel social unrest, hinder necessary reforms, and weaken capacity to address shocks; social unrest could increase interest spreads and hurt confidence and economic activity. - Policy Response: Design reforms such that fiscal adjustment does not hurt vulnerable groups. Continue engaging the broader public, explaining benefits of the reform program. Prioritize social spending to achieve more inclusive growth. Continue to liberalize trade and improve the business climate to promote faster job creation, including for youth, and foster inclusive growth. - Climate Change - Relative Likelihood: Medium - Possible Impact: High - Key points: Extreme climate events driven by rising temperatures can cause loss of life, damage to infrastructure, food insecurity, supply disruptions, lower growth, and financial instability; Ecuador is vulnerable to landslides, floods, extreme heat, droughts, volcanic and seismic activity; disasters could damage infrastructure and hit production in the oil and mining sectors with knock-on fiscal, external, and financial effects. - Policy Response: Implement policies to build resilience in infrastructure to natural disasters. Invest to protect critical financial, transport, communication, or energy infrastructure to minimize disruptions. Build precautionary savings buffers. ### Annex III. Sovereign Risk and Debt Sustainability Framework — Key Findings and Projections - Overall assessment: Ecuador’s public debt continues to be assessed as sustainable but not with high probability; the fiscal plan supported by the EFF program is essential to rebuild buffers and restore market confidence. The debt fanchart module flags significant uncertainty around the debt path. - Recent outcomes: - Public debt-to-GDP ratio decreased in 2024 to 53.8 percent of GDP from 54.3 percent in 2023. - Decrease drivers: a new debt-for-nature swap that lowered external debt outstanding by US$527 million and repayment of domestic accounts payable—including in arrears; new debt was mostly related to large borrowing from multilateral institutions catalyzed by the Fund-supported EFF program. - Spreads have declined to about 800 basis points as of the second week of October of 2025. - Baseline assumptions and projections: - The NFPS primary balance is projected at nil in 2025, and to converge to a primary surplus of 2.4 percent of GDP in the medium term. - Public debt-to-GDP ratio expected to decline from 53.8 percent in 2024 to below 40 percent by 2031, reaching the COPLAFIP debt target one year ahead of schedule. - Gross financing needs (GFNs) are forecasted to decline from 8.5 percent of GDP in 2024 to 6.3 percent in 2025 and then to decline further to around 4 percent of GDP over the medium term. - Definitions and assumptions: - Public debt in the SRDSF: consolidated liabilities of the NFPS (PGE, CFDD, social security funds, public nonfinancial corporations, and BEDE); instruments include loans, securities, liabilities under oil related financing, central bank lending to the government, deposits at BEDE, and other accounts payable including arrears. - Fiscal multiplier assumed in the baseline: 0.5. - Growth path in the baseline is somewhat more conservative than benchmark metrics used in the SRDSF realism assessment. - Risks and realism: - Realism assessment: sustaining the primary consolidation envisaged is ambitious compared to cross-country historical experience; the debt fanchart shows that debt could increase significantly under an adverse yet plausible scenario. - Downside risks: uncertainty of external financing sources; implementation capacity of the fiscal program; possibility of growth underperforming due to security situation uncertainty; lower oil prices under high global uncertainty; disruptions in oil production or renewed energy shortages. - Mitigating factors: large share of multilateral and bilateral official debt with comparatively low rollover risk and long maturities; relatively low GFNs in the projection; successful performance of fiscal measures implemented so far under the program. *Source: IMF staff materials contained in Annex II. Risk Assessment Matrix and Annex III. Sovereign Risk and Debt Sustainability Framework.* ### 5. Debt consolidation across sectors: ### 5. Debt consolidation across sectors: ### Public debt structure indicators - Perimeter shown is nonfinancial public sector. - Debt by currency (Percent of GDP): charts indicate composition across Foreign currency, Local currency, Local-linked for projection period 2015–2035 (no numeric breakdown in text). - Public debt by holder (Percent of GDP): categories shown include External private creditors, External official creditors, Domestic other creditors, Domestic commercial banks, Domestic central bank (no numeric breakdown in text). - Public debt by governing law, 2024 (Percent): categories shown include Domestic law, Foreign law ex. multilateral, Multilateral (no numeric breakdown in text). - Debt by instruments (Percent of GDP): Marketable debt and Nonmarketable debt shown for 2020–2030 (no numeric breakdown in text). - Public debt by maturity (Percent of GDP): maturity buckets shown ≤ 1 year, 1-5 years, > 5 years; residual maturity reported as 6. years (as printed). ### Baseline scenario (Percent of GDP unless indicated otherwise) - Actual public debt 2024: 53.8 - Projected public debt (selected years): - 2025: 53.0 - 2026: 51.9 - 2027: 50.1 - 2028: 48.1 - 2029: 45.6 - 2030: 42.7 - 2031: 39.6 - 2032: 36.4 - 2033: 33.2 - 2034: 30.3 - 2035: 27.8 - Change in public debt (year-on-year, Percent of GDP): - 2025: -0.6 - 2026: -0.8 - 2027: -1.1 - 2028: -1.8 - 2029: -2.0 - 2030: -2.5 - 2031: -3.0 - 2032: -3.1 - 2033: -3.1 - 2034: -3.2 - 2035: -2.9 - Contribution of identified flows (Percent of GDP, selected years): 0.5, -0.8, -1.1, -1.8, -2.0, -2.5, -3.0, -3.1, -3.1, -3.2, -2.9, -2.6 (series aligned with projection years). - Primary deficit (Percent of GDP, selected years): 0.2, 0.1, -1.2, -2.0, -2.4, -2.4, -2.4, -2.4, -2.4, -2.4, -2.4 - Noninterest revenues (Percent of GDP, series): 35.6, 35.2, 35.4, 35.5, 35.7, 35.5, 35.3, 35.3, 35.3, 35.3, 35.3 - Noninterest expenditures (Percent of GDP, series): 35.8, 35.2, 34.3, 33.6, 33.3, 33.1, 32.9, 32.9, 32.9, 32.9, 32.9 - Automatic debt dynamics (Percent of GDP, series): 0.8, 0.0, 0.8, 0.4, 0.4, 0.3, 0.3, 0.3, 0.4, 0.4, 0.4 - Real interest rate and relative inflation (Percent, series): -0.3, 1.7, 1.8, 1.6, 1.7, 1.6, 1.6, 1.6, 1.5, 1.4, 1.3 - Real interest rate (Percent, series): -0.3, 1.7, 1.8, 1.6, 1.7, 1.6, 1.6, 1.6, 1.5, 1.4, 1.3 - Relative inflation (Percent, series): 0.0 across projection years shown - Real growth rate (Percent, series): 1.1, -1.7, -1.0, -1.2, -1.3, -1.3, -1.3, -1.2, -1.2, -1.1, -1.0, -0.9 (series aligned) - Other identified flows (Percent of GDP, series): -0.4, -0.8, -0.8, -0.2, 0.0, -0.4, -0.8, -1.0, -1.1, -1.1, -0.8, -0.5 - Contingent liabilities: 0.0 reported for projection years shown - (minus) Interest Revenues (Percent of GDP, series): -1.2 repeated across years shown - Other transactions (Percent of GDP, series): 0.8, 0.4, 0.5, 1.1, 1.3, 0.8, 0.4, 0.2, 0.1, 0.1, 0.3, 0.7 - Contribution of residual (Percent of GDP): -1.1, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0 (series) - Gross financing needs (GFN, Percent of GDP, series): 8.5, 6.3, 5.4, 5.1, 3.8, 3.9, 4.0, 4.2, 4.3, 4.0, 3.4, 2.8 - Of which: debt service (Percent of GDP, series): 9.5, 7.5, 7.8, 8.3, 7.5, 7.5, 7.6, 7.8, 7.9, 7.6, 7.0, 6.4 - Local currency debt service (Percent of GDP, series): 9.5, 7.5, 7.8, 8.3, 7.5, 7.5, 7.6, 7.8, 7.9, 7.6, 7.0, 6.4 - Foreign currency debt service (Percent of GDP): 0.0 across years shown - Memo: - Real GDP growth (percent): -2.0, 3.2, 2.0, 2.4, 2.6, 2.8, 3.0, 3.0, 3.0, 3.0, 3.0, 3.0 (series across horizon) - Inflation (GDP deflator; percent): 5.0, 1.4, 1.2, 1.7, 1.5, 1.5, 1.5, 1.5, 1.5, 1.5, 1.5 - Nominal GDP growth (percent): 2.9, 4.7, 3.2, 4.1, 4.2, 4.3, 4.6, 4.6, 4.6, 4.6, 4.6 - Effective interest rate (percent): 4.4, 4.7, 4.7, 4.7, 4.8, 5.0, 5.0, 5.2, 5.4, 5.5, 5.6, 5.7, 5.9 - Commentary: "Public debt would be on a downward path under the program. Projected GFNs are lower than debt service GFNs mostly due to primary balance suplus." ### Contribution to change in public debt and realism of baseline assumptions - Extended projection chart shows cumulative components (Primary deficit; Real Interest rate and relative inflation; Real GDP growth; Exch. rate depreciation; Other flows; Residual) with cumulative numbers across 2015–2035 (visual; no explicit numeric table beyond earlier line items). - Forecast track record and realism diagnostics compare projected public debt to GDP, primary deficit, and r - g across t+1, t+3, t+5 vintages and versus comparator group (Emerging Markets, Commodity Exporter, Program). - Commentary: "The program fiscal plan features a fiscal adjustment that is large relative to historical and cross-country comparisons. To achieve the debt reduction goals specified in the plan it will be important to avoid policy slippages." ### Medium-term risk assessment - Debt fanchart module: - Fanchart width (percent of GDP): 76.9 1.1 (as printed) - Probability of debt non-stabilization (percent): 17.1 0.1 (as printed) - Terminal debt-to-GDP x: 30.5 0.7 (as printed) - Debt fanchart index (DFI): 1.9 - Risk signal: Moderate (per module thresholds) - Gross financing needs (GFN) module: - Average baseline GFN (percent of GDP): 4.8 1.6 (as printed) - Initial Banks' claims on the gen. govt (pct bank assets): 4.3 1.4 (as printed) - Chg. In banks' claims in stress (pct banks' assets): 10.4 3.5 (as printed) - GFN financeability index (GFI): 6.5 - Risk signal: Low (per module thresholds) - Medium-term index: Risk signal reported as Low risk in a chart; final assessment: - Prob. of missed crisis, 2025-2030, if stress not predicted: 18.2 pct. - Prob. of false alarms, 2025-2030, if stress predicted: 36.4 pct. - Commentary: "The two medium-term tools assess sovereign risk as moderate, mostly driven by the width of the confidence interval in the debt fanchart tool. The stress test analysis shows that gross financing needs could increase substantially in case of an unexpected natural disaster, while the impact would be smaller following a commodity price decline." ### Long-term modules and natural resources - Triggered long-term modules include Pensions and Health. - Long-term risk assessment highlights "Large Amortization" risk: Ecuador faces sizeable amortizations in the medium-term. - Commentary: "Following the program completion, maintaining a fiscal stance consistent with a debt stabilizing primary balance would ensure that debt remains below the COPLAFIP limit. At the same time, the module highlights that large fiscal imbalances as experienced in the past decade could lead to a rapidly increasing debt ratio." - Natural resources long-term module commentary: "Ecuador does not face immediate pressures from depleting oil resources." ### Program progress, policy stance, and commitments (from Letter of Intent and MEFP excerpts) - Program support: 48-month Extended Fund Facility (EFF) arrangement approved May 31, 2024. - Key program developments and objectives: strengthen public finances; keep inflation low; increase international reserves; record high current account surplus; enhance fiscal sustainability while safeguarding vulnerable groups; structural reforms to foster growth and investment. - Implementation status (as of October 15, 2025 letter): - "We have accomplished the goals set for the Third Review under the EFF arrangement." - "All quantitative performance criteria (QPC) and most indicative targets (ITs) for end-August 2025 were met." - Arrears: continued progress, though end-August IT was not met due to temporary delays in financing. - Social protection: "1,257,536 lower-income families covered by the social safety net as of August 2025, exceeding our target." - Requests to IMF: completion of the Third Review under the EFF and associated disbursement of SDR 438.4 million for budget support; completion of the financing assurances review; rephasing of certain review test dates. - Policy commitments and safeguards: - Observe standard performance criteria against imposing or intensifying foreign exchange restrictions or introducing/modifying multiple currency practices. - Will not conclude bilateral payment agreements inconsistent with Article VIII of the Fund’s Articles of Agreement, nor impose or intensify import restrictions for balance of payments reasons. - Committed to gradually phasing out the tax on transfers abroad (ISD) as macroeconomic and balance of payments stability are restored and reserves are strengthened. - Governance and structural measures: introduced changes to the Organic Monetary and Financial Code (COMYF), creation of a joint Financial and Monetary Policy Regulation Board; updates to Organic Budget Code (COPLAFIP) and reforms in anti-corruption and central bank governance noted in MEFP. *Source: Fund staff; Letter of Intent and Memorandum of Economic and Financial Policies, Quito, October 15, 2025.* ### 4. During the first period of our administration (November 2023-May 2024), we took ### 4. During the first period of our administration (November 2023-May 2024), we took ### Fiscal and security actions (November 2023–May 2024 and June 2024) - Implemented a three-percentage point value added tax (VAT) rate hike alongside additional revenue measures, totaling about 2 percent of GDP, to reduce the fiscal gap. - Introduced a limited set of tax incentives to stimulate growth and promote youth employment. - Took steps to encourage private participation in the electricity generation sector. - Announced in January 2024 the intention to target the fuel subsidies to the most vulnerable, with subsequent actions implemented in June 2024. - Bolstered government capability to fight crime by reorienting current expenditure to boost the security envelope and enhancing the role of the military. - Held a referendum in April 2024 that approved measures to tackle the security situation. ### Developments after May 2025 election and macroeconomic outcomes - After President Noboa’s re-election in May 2025, passed legislation to strengthen public finances, enhance public procurement, and foster financial sector development. - In September 2025, aligned domestic diesel prices with international prices. - Sovereign debt spreads narrowed to about 780 basis points by early October 2025. - Economic activity rebounded strongly after contracting in 2024 due to a severe electricity crisis, alongside low inflation. - Exceptional growth of nonoil exports produced a record surplus in the current account balance, with strong momentum continuing in 2025, improving domestic liquidity and international reserve buffers. ### Objectives of the IMF-supported EFF arrangement - (i) strengthen fiscal sustainability, while protecting vulnerable groups; - (ii) rebuild fiscal and external buffers; - (iii) safeguard dollarization and macroeconomic stability; - (iv) enhance financial stability and integrity; - (v) continue the structural reform agenda to unlock the economy’s potential, fostering strong and inclusive economic growth. ### Energy resilience and electricity sector reforms - Undertaking efforts to enhance electricity supply capacity in the short, medium, and long term and to diversify the energy matrix. - Enacted new regulations in 2024 and 2025 granting the Ministry of Energy and Mines authority to directly delegate projects of up to 100 MW in non-conventional and transitional renewable energy, streamlining approval requirements, offering clean energy preferential pricing, and allowing private entities to sell surplus energy from self-generation to the national grid. - Reformed medium- and high-voltage electricity tariffs to be consistent with cost recovery and reducing energy subsidies. ### A. Strengthening Fiscal Sustainability — recent reforms and framework - Updated COPLAFIP introduced: - a medium-term fiscal framework (MTFF), - clear anchors to reduce public debt, - the National Fiscal Coordination Committee, - a fiscal risk management exercise. - Fiscal governance enhanced by revamp of fiscal statistics and cash management, supported by IMF technical assistance (TA). - An updated IMF Fiscal Safeguards Review in 2024 confirmed progress since the 2021 review. - Published an MTFF aligned with EFF-supported program (end-October 2024 structural benchmark (SB), met). - Prepared a contingency plan as a prior action for program approval in May 2024. ### A. Strengthening Fiscal Sustainability — recent fiscal outcomes and monitoring - 2024 NFPS overall fiscal deficit reduced by over 2 percentage points of GDP to 1.3 percent of GDP. - Started clearing domestic payment arrears, improving liquidity conditions. - Revenue measures in 2024 led to a historic high level of total gross tax revenue. - Prior action: prepared and shared a projected monthly cash flow and financing plan for the budgetary central government (PGE). ### A. Strengthening Fiscal Sustainability — medium-term consolidation targets and composition - Fiscal targets: - Reduce NFPS overall deficit to 1.2 percent of GDP in 2025. - Reach an overall surplus of 1.3 percent of GDP by end of program in 2028. - Achieve a NFPS primary surplus of 2.4 percent of GDP in 2028. - Cumulative consolidation of about 6.6 percentage points of GDP in the non-oil primary balance including fuel subsidies (NOPBS) over 2024-28 relative to end-2023. - Planned measures to achieve consolidation: - Nonoil Revenues: - Implement plan to mobilize nonoil revenues (mid-November 2024 SB, met) by replacing temporary measures with permanent measures, mainly revamping taxation of dividends and undistributed profits and improving tax administration. - Continue reviewing inefficient tax expenditures and exemptions, including in investment contracts. - Develop and implement a new fiscal regime for the mining sector with IMF TA support (end-December 2025 SB). - Oil Revenues: - Streamline fuel subsidies alongside comprehensive social protection mechanisms for the most vulnerable. - In September 2025, aligned diesel prices with international prices. - Eliminated sectoral fuel subsidies earlier in 2025 and aligned domestic price of low-octane gasoline with international prices. - Implement compensatory measures, mainly for transporters, to allow gradual adaptation to new prices. - Launch initiatives to increase net oil revenues, including gradually increasing production (partly through greater private investments) and enhancing oil refinery capacity. - Public Sector Wage Bill: - June 2025: streamlined ministries and other public agencies to improve efficiency. - Continue limiting increases in headcount and wages; 2024 norm remains in effect capping public sector wages below the salary of the President. - Continue reviewing and streamlining temporary contracts while ensuring hiring of additional police and domestic security forces as needed. - Procurement: - Continue procurement reforms to optimize expenditure and ensure transparency and quality. - July 2023: SERCOP issued norms to operationalize the 2022 Procurement Law. - June 2024: SERCOP presented the MAPS evaluation report (joint work with IDB). - Established the National Control Subsystem (SNC), presided by SERCOP and comprising UAFE, SRI, the Office of the Comptroller, the State Attorney’s Office, and financial regulators; timeline to operationalize the SNC (end-December 2024 SB, met). - With IDB assistance, developing framework to upgrade SOCE (end-July 2025 SB, not met, proposed reset to end-December 2025). - Capital Expenditure: - Prioritize capital projects by estimated social and economic impact. - Promote PPPs and concessions with due account of contingent liabilities and fiscal risks. - Ecuadorian Development Bank to channel multilateral and bilateral resources for local government infrastructure. - Undertook PIMA in 2023 including C-PIMA; intend to gradually implement PIMA/C-PIMA recommendations. ### A. Strengthening Fiscal Sustainability — budgeting, arrears, and financing strategy - Budgets and benchmarks: - 2024 budget extended into 2025 as stipulated by COPLAFIP due to election year. - Enacted measures in late 2024 to ensure 2025 fiscal plan aligns with EFF program and MTFF (early-December 2024 SB, met). - Draft budget for 2026 to be aligned with EFF-supported program targets (proposed SB for end-November 2025). - Arrears: - Committed to clearing domestic arrears; included clearance of PGE arrears with private sector in multi-year fiscal financing plan. - November 2024: prepared and shared plan for clearing and preventing PGE arrears (end-November 2024 SB, met). - Financing strategy: - Near term reliance on multilateral and bilateral sources, seeking to regain market access in 2026, and gradually develop domestic financing. - Published a new medium-term debt management strategy (MTDS) (end-October 2024 structural benchmark, met). - Plans to enact regulations for domestic bond and treasury note auctions (end-November 2025 SB) and launch auctions in 2026 (proposed SB for end-September 2026). ### B. Expanding Our Social Safety Nets - Aim to ensure fiscal consolidation burden is not borne by the poor and vulnerable. - Following diesel reform in September 2025, redirected savings to support vulnerable groups. - Social registry and coverage: - Upgraded social registry and expanded coverage with World Bank assistance (end-October 2024 SB, met). - As of August 2025, over 1.2 million family units in the bottom three income deciles benefited from social protection transfers. - Coverage expanded by 55,000 families in October 2025, with continued additions planned to achieve universal coverage in the bottom two deciles and the majority in the third decile by the end of the IMF-supported program. - Working on permanent updating of the social registry including institutional strengthening at central level and territorial deployment with subnational governments (GADs). - With World Bank support, making social protection more efficient and comprehensive through monetary transfers and complementary state services. - MIES campaign to increase use of banking services by recipients of social protection transfers. - Social assistance transfer programs listed in the Technical Memorandum of Understanding (TMU). ### C. Enhancing the Institutional Framework, Governance, and Transparency - Fiscal statistics and transparency: - 2020 COPLAFIP reforms required timely collection, accurate compilation, and transparent publication of fiscal data with adequate NFPS subsector coverage. - Established a dedicated statistics unit at MEF for government finance statistics compilation. - IMF TA updated GFS training curriculum and produced a training schedule. - An IMF long-term expert (LTX) worked one year with the statistics unit on compiling, verifying, and reconciling government finance and debt statistics. - Objective to increase NFPS coverage by including public companies in the electricity sector and expanding local government companies sample. - February 2025: issued a technical regulation (norma técnica) defining procedures for monitoring and evaluating compliance with fiscal rules, in line with COPLAFIP. - Dissemination practices: - Fiscal statistics disseminated monthly according to a pre-established publication calendar (updated once a year). - Monthly publication of time series data on revenues, expenditures, and transactions in financial assets and liabilities by each NFPS subsector, indicating whether data are preliminary or definitive. - An analytical report on the Budgetary Central Government GFS has been created and is published alongside the monthly time series (collaboration with IMF’s Statistics Department). - Social Security Fund (IESS) revisions: - Revised historical balances of IESS in collaboration with IMF’s Statistics Department. - Adjusted IESS compilation process and corrected transfers from central government to IESS for accrued pension liabilities going back to 2013. - Incorporated additional healthcare transfer obligations to IESS into expenditure and debt statistics based on conservative estimation pending healthcare audits. - Included accrued pension transfer obligations and estimation of healthcare transfer allocations to IESS in the central government 2024 budget and MTFF and will continue recording conservative estimates in future budgets. *IMF staff memorandum — Ecuador (excerpt).* ### 20. We will establish a revised mechanism to settle healthcare claims from IESS and plan to ### We will establish a revised mechanism to settle healthcare claims from IESS and plan to ### Healthcare claims, IESS obligations, and transparency - Establish an updated agreement between the MEF and IESS on the transfer of healthcare obligations (including both internal and external providers), building on the December 2022 agreement (end-August 2025 SB, not met, proposed to be reset for end-November 2025). - The updated MEF/IESS agreement stipulates the process to audit and settle the 2022 healthcare obligations. - Implement the resulting agreement to: - prevent future arrears on healthcare obligations; - improve the reliability of fiscal statistics; and - strengthen the sustainability of the IESS. - Procurement to hire an external auditor to review the 2023 and 2024 healthcare obligations to IESS was finalized (end-December 2024 SB, met) and the audits are underway. - Plan to publish an audited actual report for the social security system with data up to 2024 (proposed SB for end-December 2026). ### Public Financial Management (PFM) and cash management - With IMF-provided PFM expert assistance, expanded cash management planning capability and horizon to encompass the full length of the annual budget cycle. - Remaining challenge: develop capability to update cash management planning on a 12-month rolling basis from any point in the budget year. - Implemented a new monitoring system to evaluate the existing stock of domestic payment arrears of the central government and selected relevant entities of the NFPS. - January 2022: published a methodology to estimate the stock of arrears and reporting templates for public sector entities. - Estimated the stock of potential claims on PGE, including with the IESS, GADs, private sector, or others by type of expenditure, year, and beneficiaries. - Started publishing data on monthly arrears in the public debt bulletins, as per COPLAFIP law. - Will design a policy so MEF can gather monthly information on arrears from other entities of the NFPS, as mandated by COPLAFIP. - Implemented, with IMF technical support, an automatized process for PGE payments, including arrears’ payments (end-July 2025 SB, implemented with delay). ### State-owned enterprises (SOEs) and fiscal risk monitoring - Seven public companies that were not managed efficiently are in the process of closure; example: Public Enterprise Coordinating Company (EMCO), closed in 2024. - For remaining SOEs: commit to strengthen operational frameworks, reform collective labor agreements, implement best practices to improve efficiency and limit contingent liabilities. - Support a structural cost-optimization strategy, including a comprehensive efficiency assessment of the state to curtail unproductive activities and obtain efficiency gains. ### Public debt transparency - Implemented actions to improve public debt transparency following new debt methodological definition and with WB and Fund TA. - Developed and publish a new Debt Bulletin monthly on the official MEF website, including previously not included past obligations related to internal debt, arrears, accounts payable, and previous unregistered budgetary obligations. - Publish current public external and internal debt profile and amortization profile by source and operation. - Detailed database supporting the Bulletin is accessible on the MEF website. ### Strengthening tax administration - 2023: produced an assessment of tax administration and undertook the Tax Administration Diagnostic Assessment (TADAT) with IMF support. - Plan to implement an institutional model under the TADAT methodology to close gaps against best international practices, especially in control processes. - Implementation (with IDB support) to focus on process integration, transparency, tax registration, data intelligence, and information management. - Requested IDB TA for the National Customs Service of Ecuador (SENAE) to enhance its modernization process. ### Strengthening the BCE institutional framework and safeguarding dollarization - 2021 COMYF revisions to support the dollarization regime included: - eliminating direct and indirect central bank financing of the government; - restoring full reserve coverage of private and public financial institutions’ deposits at the BCE; - giving technical and managerial autonomy to the BCE. - Revised law strengthened BCE balance sheet by removing legacy assets from the 1999 banking crisis; improved transparency via audit committee, external auditors, and published audited BCE financial statements. - Implemented capacity development program for auditors; required certification by the Institute of Internal Auditors; implemented peer-review recommendations for audit department; modified organizational structure; ensured permanent constitution of the audit committee. - Updated IMF safeguards assessment in 2024 confirmed significant safeguards strengthening since 2019. - Aligned implementation of the “backing rule” with the 2023 reprofiling of government debt held by the BCE, deferring requirement for full coverage of the first, second, and third balances to 2040 to ensure effective implementation and safeguard dollarization. - Amended COMYF to establish a joint Financial and Monetary Policy and Regulation Board and update BCE mandate consistent with international central banking practices. ### Contingent liquidity facilities and letters of credit - 2022: FRBNY granted BCE access to a FIMA Repo Facility of US$1 billion for exclusive central banking operations. - 2023: FLAR granted BCE access to a contingent credit line of up to US$230 million. - BCE renewed contingent liquidity facility with BIS of up to US$840 million; in June 2025 BIS granted a new contingent liquidity line up to US$1.5 billion. - These facilities strengthen management of international reserves and provide additional liquidity buffers; potential activation by liquidity funds of financial institutions when legal reforms by COSEDE are implemented. - BCE reported an all-time high of letters of credit: increased from US$966 million in June 2021 to a historical maximum of US$2 billion in October 2025. ### National accounts, statistics, and green initiatives - December 2023: BCE concluded and disseminated update of Annual and Quarterly National Accounts, changing from fixed base methodology to a moving base with reference year 2018. - Project allowed inclusion of broader statistical indicators reflecting the recent economic structure; followed latest international statistical practices. - IMF provided TA on calculation of demand components of Quarterly National Accounts. - Early 2025: released new 2018-23 Input-Output Matrices. - Continue working with IMF TA to improve macroeconomic statistics: remittances, Foreign Direct Investment (FDI), and the Export and Import Price Indexes. - June 2025: with ECLAC and AFD support, BCE released the Bioeconomy Satellite Account. - BCE to complete in 2025 an Environmental, Social and Governance (ESG) framework with GGGI and Deloitte support. - 2025: BCE published research on climate events’ impact on Ecuador’s financial system; signed MoU with ARM and Duke University to conduct policy research to strengthen the Gold Commercialization Program. - September 2025: BCE accepted as a Member of the Network of Central Banks and Supervisors for Greening the Financial System (NGFS). ### BCE financial results and equity strengthening - BCE reported accumulated net profits of US$1.6 billion between 2021 and 2024. - BCE’s equity increased from US$1.6 billion to US$2.8 billion. - Increased general reserve fund to US$500 million, reaching 500 percent of the authorized and paid-in capital, in compliance with COMYF requirements. - By August 2025, BCE’s equity surpassed for the first time US$ 3.2 million. - BCE transferred US$1.1 billion in profits to the MEF between 2021 and 2024. ### Financial system resilience, supervision, and macroprudential measures - 2023 Financial System Stability Assessment (FSSA) covered solvency/liquidity risks, oversight, macroprudential policies, safety nets, crisis preparedness, payment systems, preconditions for capital market development, and access to finance. - FSSA key recommendations: (i) strengthen financial sector oversight and coordination; (ii) enhance prudential framework governing capital and liquidity; (iii) foster financial deepening and capital market development. - Gradual implementation of FSSA recommendations to align prudential regulatory framework and oversight with international standards. ### Coordination, resolution framework, and cooperative sector reforms - Merged Financial Policy and Regulation Board with Monetary Policy and Regulation Board into unified Financial and Monetary Policy and Regulation Board (JPRFM) as sole regulator and governing body of BCE. - Established Financial Stability Committee (FSC) comprising all authorities responsible for financial oversight (end-September 2024 SB, met). - Established inter-institutional group within FSC to coordinate bank resolution reforms and strategies (end-January 2025 SB, met). - Issued new regulations between December 2024 and May 2025 to improve governance and provisioning frameworks for cooperatives. - COSEDE issued a new operative manual for the Liquidity Fund’s trust fund in 2024. - Two insolvent medium-sized credit cooperatives liquidated in December 2024 and April 2025; a small bank liquidated in August 2025. - IMF provided TA between December 2024 and May 2025 to improve stress testing toolkit and emergency liquidity assistance framework; recommendations are being implemented. - Regulatory forbearance measures enacted for the electricity crisis expired in September 2025. ### Prudential capital and liquidity framework - Prepared methodologies and enacted macroprudential regulations on capital buffers, including surcharges on systemically important institutions and a countercyclical capital buffer (end-November 2024 SB, met). - Phased implementation of the Liquidity Coverage Ratio (LCR) for banks, expected to be achieved by 2028. - Working to improve liquidity data requirements and expand LCR implementation to large credit cooperatives. - Intensified supervision and implemented action plans for weak institutions. ### Financial inclusion, interest rate caps, and market-based reforms - Banks and credit cooperatives are subject to ceilings on lending rates differentiated by credit types and, for commercial loans, by firm size. - 2023 FSSA noted caps in a higher interest rate environment led to margin compression, distortions in credit supply, and restrictions to financial inclusion. - Recent revision updated interest rate caps on commercial and corporate loans, providing some relief. - Carried out a study of the system of interest rates (end-March 2025 SB, not met, implemented with delay in May 2025); study forms basis for gradual reform to interest rate cap system. - Objective: alleviate unwarranted credit constraints, enhance financial inclusion, support economic growth, while preserving financial stability. - Plan to work towards adopting a new interest rate methodology more attuned to market conditions. - CFN (Corporación Financiera Nacional) continues facilitating access to credit for micro, small, and medium-sized enterprises with WB, IDB, and other partners. ### Developing domestic capital markets and payment systems - Primary placements of government securities with private domestic stakeholders currently occur through Guayaquil and Quito Stock Exchanges. - Started to standardize government securities and develop a domestic yield curve. - Will issue a new regulation for domestic market auctions for bonds and treasury notes, including procedures, auction format, and rules for participation, bidding, and allocation (end-November 2025 SB). - Plan to start issuing bonds and treasury notes through domestic market auctions in2026 (proposed SB for end-September 2026). - BCE signed contract to implement a new platform for the BCE’s central securities depository (DCV) to modernize compensation, liquidation, and custody functions (end-January 2025 SB, implemented with delay). - Work to enhance the payments system by improving the RTGS at the BCE; improvements aim to facilitate national payments via interoperability, reduce transaction costs, mitigate cash risks, encourage digital commerce, and revitalize economic activity. - December 2024: Monetary Board approved a regulation on payment systems and fintech activities. - May 2025: BCE approved a resolution establishing the timeline to implement interoperability among participants of the payment system for digital transfers. *Source: 1ecuea2025002-source-pdf - 20. We will establish a revised mechanism to settle healthcare claims from IESS and plan to* ### 37. We are committed to restoring the competitiveness of the economy and raising the ### 1ecuea2025002-source-pdf - 37. We are committed to restoring the competitiveness of the economy and raising the ### Competitiveness, investment, and governance - Committed to restoring competitiveness and raising living standards for all Ecuadorians. - Actions to improve transparency and economic governance, fight crime and corruption, and address bottlenecks to investment and employment. - A decree issued in June 2024 announced a National Policy aimed at making competitiveness-enhancing regulatory improvements. - Facilitation of environmentally sustainable investment in the mining sector; recent years have seen increased mining production and exports. - Measures to boost investment in hydrocarbons and electricity supply. - Collaboration with development partners including the IMF, the WB and the IDB to carry out structural reforms to unlock growth potential. ### Trade integration and FDI prospects - 2024 ratified trade agreements with Costa Rica and China. - 84 percent of Ecuadorian products exported to Costa Rica will be exempted from tariffs; other products will benefit from gradual tariff reductions over the next five to fifteen years. - With China as Ecuador’s second-largest trading partner and the largest market for its non-petroleum exports, the agreement allows 99.6 percent of Ecuadorian exports to China to benefit from immediate or gradual tariff reductions. - Ecuador is finalizing trade agreements with South Korea and Canada, conducting trade talks with the US, and starting negotiations with the United Arab Emirates and Japan. - These trade deals will also increase the potential for productive FDI inflows. ### Anti-money laundering, countering financing of terrorism, and crime - Adopted new AML/CFT legislation to strengthen the AML/CFT framework, incorporating reforms in line with Financial Action Task Force (FATF) standards (end-February 2025 SB, met). - Legislation originally developed with IMF technical support. - Will issue necessary regulations to implement the new AML/CFT legislation to ensure its effective entering into force. - Enhancing governance and independence of the UAFE and its capabilities to produce comprehensive strategic and operational financial intelligence for proactive dissemination to law enforcement. - Launched a Joint Investigation Unit to align efforts across key public institutions against money laundering, tax fraud, and other illegal activities that finance organized crime. - Will approve, with IMF technical support, and publish a summarized version of an AML/CFT Strategic Action Plan establishing actionable policy priorities to mitigate money laundering and terrorist financing risks identified in the National Risk Assessment approved in 2024 (end-September 2025 SB, proposed to be reset to end-January 2026). ### Public sector integrity, transparency, and anticorruption measures - Issued first holistic policy on public sector integrity: “National Policy of Public Integrity 2030”, covering SOEs; strategic lines include transparency in public spending and conflict of interests. - December 2024 approval of the 2024-28 National Integrity and Anti-Corruption Plan to strengthen institutional capacity, increase transparency, and foster citizen participation. - AML/CFT law introduced an enhanced asset and interest declaration framework. - A Draft Law to Prevent Conflict of Interests in Public Administration (prepared by the General Comptroller and the Anti-Corruption Secretariat) submitted to the National Assembly in 2022: - Once in force, the law would expand asset declarations of politically exposed persons (PEPs) and mandate online public access to relevant information on assets, incomes, liabilities, and interests. ### Procurement, UBO transparency, and registries - SERCOP requires information on the Ultimate Beneficial Ownership (UBO) of companies awarded public procurement contracts; submission by state suppliers through an electronic form to facilitate continuous publication on SERCOP’s website. - Within the SOCE, SERCOP maintains an updated section featuring UBO information for most recent public contracts, accessible for public consultation. - The SRI is developing a Registry for Ultimate Beneficiaries; new regulations issued in September 2024; - Registry will serve as central repository of UBO information and cross-reference with SERCOP and the Superintendency of Companies. - December 2024 approval of the National Integrity Strategy for Public Procurement (ENICOP) to strengthen transparency and integrity in public procurement. ### Audits of state-owned enterprises and fiscal transparency - Financial audits of the national oil company are underway; plans to audit two electricity SOEs. - January 2024: hired an independent top-tier audit firm with IDB support. - Audits covered 2019 and 2020 financial statements of Petroecuador and Petroamazonas, and the 2021 financial statement of the merged Petroecuador. - Completed and shared with IMF staff the 2019 and 2020 audit results (end-March and end-September 2025 SBs, met). - Will launch a public tender to audit Petroecuador’s financial statements for 2022-24 (proposed SB for end-February 2026) and hire firms to audit CNEL and CELEC. - Will gradually address issues identified in audits going forward. ### Public-private partnerships (PPPs) and fiscal risk management - New PPP framework: law approved December 2023; complementary regulations issued February 2024. - PPP pipeline prioritizes road infrastructure and renewable energies. - Fiscal risk unit within the MEF to evaluate PPP viability, quantify risks to public sector balance sheet, propose mitigation, and present risks in fiscal risk statements annexed to annual budgets. ### Mining, hydrocarbons, and environmentally sustainable projects - 2024 creation of an inter-institutional committee to devise near-term actions to fight illegal mining and update the mining cadaster. - Will implement regulation for the reopening of the mining cadaster (end-June 2026 SB) to unlock private investments in environmentally sustainable mining projects. - June 2024 decree issued a new regulatory framework for natural gas projects. - 2025 launch of a multi-year plan to mobilize investments in the hydrocarbon sector, including significant private sector participation. ### Electricity sector challenges, renewable generation, and energy policy - Power shortages since late 2023 linked to extreme climate events affecting hydroelectric generation and longstanding underinvestment. - Essential maintenance of existing plants is critical, including through private investment. - October 2024: National Assembly approved an Organic Law to Promote Private Initiative in the Transition to Renewable Energies to boost private participation. - Enacted secondary regulations to allow private entities to sell surplus electricity from self-generation to the national grid (end-August 2025 SB, met). - October 2024: reformed electricity prices paid by large-scale mining sector. - June 2025: adopted a transparent and cost-reflective pricing mechanism and revised medium- and high-voltage electricity tariffs in line with gradually reducing energy subsidies and enhancing fiscal sustainability (end-August 2025 SB, met). - Diversification beyond hydroelectric generation as per Electricity Master Plan and the 2025-2030 Investment Plan of the Electric and Mining Sectors. - Government developed 12 projects for electricity generation through Non-Conventional Renewable Energies (NCRE)—solar, wind, and hydroelectric—with IDB support: - These generation projects will contribute 833 MW of power, backed by private investments. - Establishment of a mechanism to cover commercial revenue risks, with state commitment and an IDB guarantee, to attract private investors and international development financial institutions. - Approved environmental licenses for several renewable projects; Villonaco III wind project set to begin construction. - Plans also for geothermal and nuclear projects, and urgent strengthening of electricity transmission system. - With the IDB’s support, execution started on a plan to strengthen electricity interconnection with Peru. ### Social measures, migrants, entrepreneurship, and digital transformation - February 2025: created a mechanism to care for, protect, and facilitate reintegration of Ecuadorian migrants. - March 2025: organic law to support female entrepreneurs published in the Official Gazette. - Launched a digital transformation project to modernize public services and improve transparency—collaboration with global tech firms on customs controls, digitalization of civil services, and healthcare processes. ### Climate resilience, nature conservation, and international finance - Strengthening resilience to extreme weather events and natural disasters is a macroeconomic imperative. - WB’s Country Climate and Development Reports (CCDR) published September 2024 analyze Ecuador’s climate challenges. - Established an institutional committee on climate finance within MEF with IDB support. - Expanded several protected areas, including the Galapagos marine reserve; May 2023 secured long-term financing for its protection as part of the world’s largest debt-for-nature swap on record. - December 2024: completed second debt-for-nature swap to fund the Amazon Biocorridor Program to conserve the Ecuadorian Amazon rainforest and biodiversity. - Expressed interest in a potential Resilience and Sustainability Facility arrangement to support efforts to increase resilience to natural disasters. ### Program monitoring, quantitative performance criteria, and indicative targets - Program implementation monitored through quantitative performance criteria, indicative targets, and structural benchmarks; detailed in Tables 1 and 2 with definitions in the TMU. - EFF arrangement subject to triannual reviews during 2025 and shift to semiannual reviews during 2026-28, with the fourth and fifth reviews occurring on or after December 15, 2025, and March 15, 2026, respectively. Key quantitative figures and status from Table 1 (selected entries preserved exactly as in source): - Nonoil primary balance of the budgetary central government (PGE) (floor): - End-Oct. 2025 (Proposed) Program 3/Adj. 4/Actual Status: -341-341294Met - End-Jan. 2026 (Proposed) Program 3/Adj. 4/Actual Status: -1,220-1,220-295Met - End-Jun. 2026 Program: -1,255-875-302-1,310 - Overall balance of the PGE and CFDD (floor): - End-Oct. 2025: -1,041-1,181-838Met - End-Jan. 2026: -2,628-2,617-2,206Met - End-Dec. 2026 Program: -3,565-1,229-1,341-2,624 - Accumulation of NFPS deposits at the central bank (floor): - End-Oct. 2025: 0-957423Met - End-Jan. 2026: 0-1,063243Met - End-Dec. 2026 Program: 243100200645 - Non-accumulation of external payments arrears by the NFPS (continuous performance criterion): - Values shown: 00Met00Met0000 - (No new) Central bank direct and indirect financing to the NFPS (continuous performance criterion): - Values shown: 00Met00Met0000 - Indicative targets (selected): - Overall balance of the NFPS (floor): -89-229644Met; -1,103-1,092-1,023-667217-46 - Nonoil primary balance including fuel subsidies (NOPBS) of the NFPS (floor): -1,151-1,011-379Met; -3,070-3,081-3,798-1,513-1,317-3,434 - Change in the stock of NIR (floor): -34-991828Met; -574-1,637817Met; -125-260315963 - Stock of PGE arrears to the domestic private sector (ceiling): 600660Not Met400480Not Met480330210105 - Number of families in the first three income deciles nationwide covered by cash transfer programs (floor): 1,228,6601,248,805Met1,244,3361,257,351Met1,260,0121,283,0121,289,0121,317,012 ### Structural benchmarks (selected entries and status from Table 2) - Public Financial Management: - Publish an updated Medium-Term Fiscal Framework (MTFF) in line with program targets. Due: End-October 2024. Status: Met. - Publish a Medium-Term Debt Management Strategy in line with program targets. Due: End-October 2024. Status: Met. - Implement an automatized process for budgetary central government (PGE) payments, including arrears’ payments. Due: End-July 2025. Status: Not Met. Implemented with delay. - Domestic Arrears: - Share with Fund staff an updated plan to clear and prevent the resurgence of domestic arrears of the PGE. Due: End-November 2024. Status: Met. - Tax Reform: - Prepare and share with the Fund a plan to mobilize nonoil fiscal revenues. Due: Mid-November 2024. Status: Met. - Fiscal Strategy: - Enact regulation on revenue and/or expenditure measures to ensure that the 2025 fiscal plan is in line with program and MTFF commitments. Due: December 6, 2024. Status: Met. - Social Safety Net: - Share with the Fund a plan to complete the social registry to cover families in the lowest three deciles. Due: End-October 2024. Status: Met. - Governance and Transparency: - Establish an updated agreement between the MEF and IESS on transfer of healthcare obligations. Due: End-August 2025. Status: Not met. Proposed to be reset for end-November 2025. - Establish a timeline to operationalize the National Control Subsystem (SNC). Due: End-December 2024. Status: Met. - Prepare and share with the Fund the conceptual and operational framework for an upgraded Official System of Public Procurement (SOCE). Due: End-July 2025. Status: Not met. Proposed to be reset to end-December 2025. - Initiate tender to select an auditor for 2023 and 2024 healthcare audits. Due: End-December 2024. Status: Met. - Complete audits of 2019 and 2020 financial statements of Petroecuador and Petroamazonas and share results with Fund staff. Due: End-March 2025. Status: Met. - Anti-Money Laundering Framework: - Enact new AML/CFT legislation in line with FATF standards. Due: End-February 2025. Status: Met. - National AML/CFT Coordination Committee to approve and publish a summarized AML/CFT Strategic Action Plan. Due: End-September 2025. Status: Not met. Proposed to be reset to End-January 2026. - Financial Sector: - Establish a Financial Stability Committee comprising BCE, MEF, JPRF, JPRM, SB, SEPS, SCVS, and COSEDE. Due: End-September 2024. Status: Met. - Establish an inter-institutional group within the Financial Stability Committee to coordinate resolution reforms. Due: End-January 2025. Status: Met. - Issue macroprudential regulations on bank capital buffers, including surcharges on systemically important institutions and a countercyclical capital buffer. Due: End-November 2024. Status: Met. - Prepare and share with Fund staff a study of the system of interest rates. Due: End-March 2025. Status: Not met. Implemented with delay. *Source: https://www.imf.org/-/media/files/publications/cr/2025/english/1ecuea2025002-source-pdf.pdf* ### 19. Sign a contract to implement a new platform ### 19. Sign a contract to implement a new platform for the BCE’s central securities depository (DCV) to modernize the compensation, liquidation, and custody functions in line with international standards ### Structural benchmarks and status (selected benchmarks 19–29) - 19. Sign a contract to implement a new platform for the BCE’s central securities depository (DCV) to modernize the compensation, liquidation, and custody functions in line with international standards. - Objective: Foster domestic capital market development. - Due Date: End-January 2025. - Status: Not met. Implemented with delay. - Reform Area: Domestic Capital Market Development. - 20. Issue regulation for domestic market auctions for bonds and treasury notes, including procedures, auction format, and rules for participation, bidding, and allocation. - Objective: Foster domestic capital market development. - Due Date: End-November 2025. - (Status not provided in excerpt.) - 21. Implement the regulation for the opening of the mining cadaster. - Objective: Enhance transparency and attract private investment. - Due Date: End-June 2026. - Reform Area: Mining Sector. - 22. Develop a new fiscal regime for the mining sector to enhance its efficiency and revenue potential (informed by IMF technical assistance). - Objective: Enhance transparency and attract private investment. - Due Date: End-December 2025. - Reform Area: Mining Sector. - 23. Complete the audit of the 2021 financial statements of Petroecuador and share the results with IMF staff. - Objective: Enhance transparency and governance in the oil sector. - Due Date: End-September 2025. - Status: Met. - Reform Area: Oil Sector Transparency and Governance. - 24. Enact secondary regulations under existing electricity laws to allow private entities to sell surplus electricity from self-generation to the national grid. - Objective: Attract private investment. Foster energy security and economic growth. - Due Date: End-August 2025. - Status: Met. - Reform Area: Electricity Sector. - 25. Adopt a transparent and cost-reflective pricing mechanism, with regular reviews, for medium- and high-voltage electricity tariffs, in line with gradually reducing energy subsidies and enhancing fiscal sustainability. - Objective: Attract private investment. Foster energy security, fiscal sustainability, and economic growth. - Due Date: End-August 2025. - Status: Met. - Reform Area: Electricity Sector. - 26. Launch auctions for domestic market bonds and treasury notes. - Objective: Foster domestic capital market development. - Due Date: End-September 2026. - Status: Proposed. - Reform Area: Domestic Capital Market Development. - 27. Submit a draft 2026 budget to the National Assembly in line with the EFF fiscal program. - Objective: Strengthen fiscal planning and management. - Due Date: End-November 2025. - Status: Proposed. - Reform Area: Public Financial Management. - 28. Launch a public tender to audit the financial statements of Petroecuador for 2022-2024. - Objective: Enhance transparency and governance in the oil sector. - Due Date: End-February 2026. - Status: Proposed. - Reform Area: Oil Sector Transparency and Governance. - 29. Publish an audited actuarial report for the social security system with data up to 2024. - Objective: Enhance transparency and governance of the social security system. - Due Date: End-December 2026. - Status: Proposed. - Reform Area: Transparency and Governance. ### Quantitative performance criteria and indicative targets (selected highlights from Table 2) - Reporting basis: US$ million, cumulative from January 1 unless otherwise indicated; some targets cumulative from November 1, 2025 for end-Jan 2026 targets. Preliminary monthly data provided within 30 days; full fiscal data within 45 days from each test date. - Quantitative performance criteria (selected rows and values as presented): - 1. Nonoil primary balance of the budgetary central government (PGE) (floor) - Program / Adj. / Actual / Status snapshots (multiple test dates shown): - -341 -341 294 Met - -1,220 -1,220 -295 Met - -1,255 -875 -302 -1,310 - 2. Overall balance of the PGE and CFDD (floor) - -1,041 -1,181 -838 Met - -2,628 -2,617 -2,206 Met - -3,565 -1,229 -1,341 -2,624 - 3. Accumulation of NFPS deposits at the central bank (floor) - 0 -957 423 Met - 0 -1,063 243 Met - 243 100 200 645 - 4. Non-accumulation of external payments arrears by the NFPS (continuous performance criterion) - 0 0 Met 0 0 Met 0 0 0 0 - 5. (No new) Central bank direct and indirect financing to the NFPS (continuous performance criterion) - 0 0 Met 0 0 Met 0 0 0 0 - Indicative targets (selected rows and values as presented): - 6. Overall balance of the NFPS (floor) - -89 -229 644 Met - -1,103 -1,092 -1,023 -667 217 -46 - 7. Nonoil primary balance including fuel subsidies (NOPBS) of the NFPS (floor) - -1,151 -1,011 -379 Met - -3,070 -3,081 -3,798 -1,513 -1,317 -3,434 - 8. Change in the stock of NIR (floor) - -34 -991 828 Met - -574 -1,637 817 Met - -125 -260 315 963 - 9. Stock of PGE arrears to the domestic private sector (ceiling) - 600 660 Not Met - 400 480 Not Met - 480 330 210 105 - 10. Number of families in the first three income deciles nationwide covered by cash transfer programs (floor) - 1,228,660 1,248,805 Met - 1,244,336 1,257,351 Met - 1,260,012 1,283,012 1,289,012 1,317,012 - Note: Aggregates and adjustors defined in the TMU. Sources: Ministry of Economy and Finance and IMF staff estimates. ### Definitions and monitoring rules (selected) - Scope of PGE: - The budgetary central government consists of the Presupuesto General del Estado (PGE). - Revenues and expenditures related to social security, public banks, SOEs, and decentralized autonomous governments are not considered part of the PGE. - Non-oil primary balance of the PGE: - Defined as total revenues of the PGE excluding oil revenues and interest revenue, minus total non-oil expenditure of the PGE excluding interest expense. - Non-oil primary revenues recorded on a cash basis; explicitly include: - Tax revenues (ingresos tributarios); - Other revenues (otros ingresos), including transfers, dividends, administrative fees, proceeds from asset monetization, and other. - Non-oil primary expenditures recorded on an accrual basis; explicitly include: - Wages and salaries (sueldos y salarios); - Purchases of goods and services (compra de bienes y servicios); - Transfers to international organizations, decentralized autonomous governments (GADs), IESS, other social security institutions (ISSFA and ISSPOL), SOEs, and the private sector (including “account 99”); - Social assistance benefits; - Employment-related social benefits; - Transactions in nonfinancial assets. - IESS transfers for healthcare: - PGE transfers to the IESS will include US$337 million in accrued estimated expenses. This estimated amount will increase every year in line with projected average annual CPI inflation and will be updated when the MEF–IESS agreement is operational. - Treatment of PPPs, divestments, and Account 99: - Government-funded PPPs treated as traditional public procurements; accrued obligations recorded in budget data and measured as part of the PGE deficit as they accrue. - Accrued but not settled PPP obligations recorded as public debt or contingent liabilities depending on nature. - Costs from divestment operations, liquidation of public entities, or lawsuit awards recorded as expense. - Expenditures recorded as a credit in “Account 99” will be recorded in the year the obligation was accrued or, if unknown, in the year the obligation is credited. - Monitoring timelines: - All fiscal data needed for program monitoring provided to the Fund within 45 days from the end of each test date as shown in Table 2. - Preliminary monthly data provided with a lag of no more than 30 days after the end of each month. ### Program exchange rates, oil price assumptions, and NFPS coverage - Program exchange rates (as of April 23, 2024, Table 1): - US Dollar to Euro 0.94 - US Dollar to Renminbi 7.11 - US Dollar to Yen 154.82 - US Dollar to SDR 1.31 - US Dollar to British Pound 0.80 - US Dollar to South Korean Won 1,380.60 - US Dollar to Swiss Franc 0.91 - US Dollar to Canadian Dollar 1.37 - US Dollar to Danish Krone 6.99 - US Dollar to Swedish Krone 10.87 - US Dollar to Norwegian Krone 10.99 - US Dollar to Australian Dollar 1.55 - US Dollar to Mexican Peso 17.00 - US Dollar to Colombian Peso 3,924.82 - US Dollar to Gold prices (US$/ounce) 2,313.00 - Source: Haver, as of April 23, 2024. - Ecuador mix crude oil price – Program assumptions (Table 3 snapshots): - Oct. 2025: 60.28 - Jan. 2026: 59.27 - (Units: US$ per barrel) - NFPS definition and coverage (selected): - NFPS consists of the PGE and CFDD, Decentralized Autonomous Governments, Social Security Funds (IESS, ISSFA, ISSPOL, BIESS), Non-Financial SOEs (detailed in Table 4), Development Bank of Ecuador (BEDE), and accounts related to payments to private oil concession operators. - Central Bank of Ecuador falls outside NFPS perimeter. - NFPS deposits at the BCE include all depository liabilities (time and on-call deposits) at the BCE of the NFPS. - NFPS deposit monitoring: - For 2025, accumulation measured as change in stock of deposits between beginning of the year and last day of the corresponding test date month. - For end-January 2026 targets, measured as change between November 1, 2025 and January 31, 2026. - NFPS deposits data provided weekly within 5 business days following the end of the week. ### Adjustors affecting targets (selected) - Adjustor on oil prices: - Floor on the overall balance of the PGE and CFDD adjusted by US$23.85 million at corresponding test dates for each US$1 per barrel deviation of the average Ecuador mix crude oil price from program assumption. Cap: US$178.9 million. - For accumulation of NFPS deposits at the BCE, adjustor is US$11.93/US$23.85 million per US$1 deviation (direction specified) with cap US$178.9 million. - Adjustor on external borrowing: - Floor on accumulation of NFPS deposits adjusted by amount of NFPS borrowing from non-residents above/below program amounts (Table 5), net of liability-management issuances without net fiscal impact. - Adjustor on disbursements from IMF and other multilateral institutions: - Floor on accumulation of NFPS deposits adjusted by excess/shortfall in program loan disbursements from IMF and other IFIs (IDB, World Bank, CAF, FLAR) relative to baseline (Table 6). - Program loan disbursements exclude project financing disbursements and disbursements repaid within same test period. - Program assumptions snapshots: - Total external borrowing consistent with program targets (Jan. 2026 cumulative from November 2025 to January 2026): 500 - Expected disbursement of IMF credit (Oct. 2025 cumulative from January 1 to Oct. 2025 / Jan. 2026 cumulative Nov. 2025–Jan. 2026): 1,182 583 - Expected disbursements of program loans by other IFIs (Oct. 2025 / Jan. 2026): 850 1,900 ### Non-Financial Public Sector corporations listed (Table 4) - Empresa Pública de Hidrocarburos del Ecuador Petroecuador - PEC - Empresa Pública Flota Petrolera Ecuatoriana-EP FLOPEC - Empresa Nacional de Ferrocarriles del Ecuador – ENFE (*) - Empresa Pública Línea Aérea del Ecuador TAME (*) - Muestra de Empresas Públicas Menores (Empresas de Agua Potable) - (*) SOEs in liquidation process, which will be in fiscal data until the liquidation process is completed. *Source: IMF staff report and Technical Memorandum of Understanding (excerpts from 1ecuea2025002-source-pdf).* ### 31. External debt is determined according to the residency criterion except in the case of the ### External debt is determined according to the residency criterion except in the case of the debt securities for which the criterion is the place of issuance of the instrument ### Definitions of debt and debt instruments - Debt: a current (not contingent) liability created under a contractual arrangement through the provision of value in the form of assets (including currency) or services that requires the obligor to make one or more future payments in the form of assets (including currency) or services to discharge principal and/or interest. - Primary forms of debt: - Loans, including deposits, bonds, debentures, commercial loans, buyers’ credits, and temporary exchanges of assets equivalent to fully collateralized loans (e.g., repurchase agreements and official swap arrangements). - Suppliers’ credits: contracts permitting deferred payment after delivery of goods or services. - Leases: for the program, debt equals the present value (at lease inception) of all lease payments expected during the agreement, excluding payments covering operation, repair, or maintenance. - Under this definition, arrears, penalties, and judicially awarded damages arising from failure to make payment on a contractual obligation that constitutes debt are debt. Failure to pay obligations not considered debt (e.g., payment on delivery) does not create debt. - Instruments considered debt instruments for GFSM 2014 and Public Sector Debt Guide purposes: - Special drawing rights (SDRs) - Currency and deposits - Debt securities - Loans - Insurance, pension, and standardized guarantee schemes - Other accounts payable ### External payment arrears — definition, coverage, monitoring - Definition: - External payment arrears for program monitoring are: - (i) external debt obligations (principal and interest) falling due after May 1, 2024 that have not been paid within 90 days of the due date, considering contractual grace periods; and - (ii) payment arrears on goods delivered or services rendered by external entities. - Coverage: - This performance criterion covers the NFPS. - Exclusions: (i) arrears on short-term trade credit or letters of credits; (ii) arrears on debt subject to renegotiation or restructuring; (iii) arrears from nonpayment of commercial claims subject to litigation initiated prior to May 1, 2024. - Monitoring: - This performance criterion will be monitored on a continuous basis. ### Ceiling on BCE direct and indirect financing to the NFPS — definitions and monitoring - Definitions: - BCE direct financing to the NFPS and indirect financing through public banks includes: - overdraft transfers from the BCE to NFPS entities; - advance distribution of unrealized profits from the BCE; - BCE acquisition of government debt on the primary market or by purchase from public institutions; - BCE lending to public banks for acquisition of government debt on the primary market or by purchase from public institutions. - Monitoring: - The performance criterion will be monitored on a continuous basis. - Monthly data on amortizations and disbursements of BCE credit to NFPS and to publicly owned banks for financing the NFPS will be provided within five business days to the Fund. ### Indicative targets — A. Floor on the Non-Oil Primary Balance Including Fuel Subsidies of the NFPS - NFPS: defined as above. - Non-oil Primary Balance of the NFPS: primary non-oil revenues minus primary non-oil spending. - Primary non-oil revenues (cash basis) include: - Tax revenues of the PGE and of GADs; - Social security contributions; - Other revenues (otros ingresos), including administrative fees, sales of market and nonmarket establishments, and other Transfers not elsewhere classified. - Primary non-oil revenues explicitly exclude: interest, proceeds from sale of financial assets, revenues from privatization, revenues from oil exports, and revenues from domestic sales of oil derivatives. - Primary non-oil spending (accrual basis) comprises: - Wages and salaries (sueldos y salarios); - Purchases of goods and services (compra de bienes y servicios), excluding “servicios petroleros” of Petroecuador, CFDD and payments to private oil companies (SHE); - Grants; - Social benefits, including social security benefits, social assistance, and employment related social benefits; - Dividends paid by social security funds; - Current and capital transfers, including “Account 99”; - Transactions in nonfinancial assets. - Petroleum product subsidies: - Include subsidies for gasoline, diesel, liquefied petroleum gas, sectoral subsidies (including consumption of jet fuel and fuel oil). - Defined as the difference between the distributor sale price and the cost of the product. - Cost = weighted average of cost of imported petroleum derivative products and cost of domestically produced petroleum products, plus cost of transportation, storage, and commercialization. - For domestically produced products, the export price of Eastern crude (opportunity cost) and refining cost are considered; import cost includes FOB price plus freight and insurance. - Non-oil primary balance of NFPS, including fuel subsidies = non-oil primary balance of NFPS minus spending on subsidies on petroleum products. - Government-funded PPPs: - Treated as traditional public procurements. - PGE obligations accrued on PPPs recorded transparently in budget data and measured as part of the PGE deficit as they accrue. - Accrued but not settled PPP obligations recorded as public debt or contingent liability depending on nature. - Other costs (divestment, liquidation, lawsuits) recorded as expense in the year incurred or credited to Account 99 (see below). - Account 99: - All expenditures recorded as a credit in “Account 99” will be recorded in the year the obligation was accrued or, if year unavailable, in the year credited to Account 99. - Monitoring: - All fiscal data needed for program monitoring provided to the Fund within 60 days from the end of each test date as shown in Table 2. - Data submission includes fuel subsidies expenditures provided by Petroecuador and below the line data. - Preliminary monthly data will be provided with a lag of no more than 30 days after the end of each month. - Adjustor on oil prices: - Floor adjusted downward/upward by US$23.85 million at corresponding test dates for each US$1 per barrel that the average Ecuador mix crude oil price is above/below the program assumption in Table 3. - Adjustor capped at US$178.9 million at corresponding test dates. - For 2025 targets, average Ecuador mix crude oil price = total value of crude oil exports divided by total volume of oil exports over the period between January 1, 2025 and each test date. - For end-January 2026 targets, average price calculated over November 1, 2025 to January 31, 2026. ### Indicative targets — B. Floor on the Overall Balance of the NFPS - Overall balance of NFPS = net lending/borrowing of NFPS. - Calculated as: non-oil primary balance of NFPS + oil balance of NFPS + interest revenues of NFPS − interest expenditures of NFPS. - NFPS revenues and interest expenses recorded on a cash basis; NFPS primary expenditures measured on an accrual basis. - Oil balance of NFPS = (i) revenues from oil exports and domestic sales of oil derivatives − (ii) expenditures on imports of oil derivatives (CFDD) − (iii) payments to private oil companies (SHE) − (iv) goods and services expense and investments of Petroecuador, including “servicios petroleros”. - Monitoring: - Fiscal data provided with a lag of no more than 90 days after each test date as shown in Table 2; preliminary data lag no more than 30 days after end of each month; submissions include below the line data. - Adjustor on oil prices: - Floor adjusted upward/downward by US$23.85 million at corresponding test dates for each US$1 per barrel that the average Ecuador mix crude oil price is above/below the program assumption in Table 3. - Adjustor capped at US$178.9 million at corresponding test dates. - Price calculation periods: January 1, 2025 to each test date for 2025 targets; November 1, 2025 to January 31, 2026 for end-January 2026 target. ### Indicative targets — C. Floor on the Change in the Stock of Net International Reserves (NIR) - NIR definition for the central bank: - US dollar value of usable gross international reserve assets of the BCE minus (i) gross reserve-related liabilities of the BCE to nonresidents, and (ii) the reserve holdings of domestic banks and deposits of other financial institutions held at the BCE. - Non-U.S. dollar denominated foreign assets and liabilities converted into U.S. dollar at program exchange rates. - Usable gross international reserve assets include: - (i) currency and deposits; (ii) monetary gold; (iii) holdings of SDRs; (iv) reserve position in the IMF; (v) securities (including debt and equity securities); (vi) financial derivatives; (vii) other claims (loans and other financial instruments). - Excluded from gross international reserves: - Any precious metals or metal deposits other than monetary gold held by the BCE; - Assets in nonconvertible currencies and illiquid assets; - Claims on residents; - Any reserve assets that are pledged, collateralized or otherwise encumbered (to the extent not already excluded), including assets tied up in repurchase agreement transactions. - Gross reserve-related liabilities comprise: - All short-term liabilities of the BCE vis-à-vis non-residents denominated in convertible foreign currencies with an original maturity of one year or less; - Short-term loans, securities, and other liabilities (excluding account payables) of the central government with an original maturity of less than 30 days; - The stock of IMF credit outstanding; - The nominal value of all derivative positions (including swaps, options, forwards, and futures) of the BCE implying the sale of foreign currency or other reserve assets. - Reserve holdings of domestic banks at the BCE: - All liabilities of the BCE to other depository institutions (otras sociedades de depósitos, per BCE Metodología: Información Estadística Mensual, 4th Edition of May 2017). - Deposits of other financial institutions at the BCE: - All liabilities of the BCE to other financial institutions (otras sociedades financieras), except deposits of the BEDE and BIESS, including those held in trust funds (fideicomisos BIESS y fideicomisos IESS). - Adjustors: - External borrowing: floor on NIR adjusted upward/downward by the amount of borrowing from non-residents above/below what is envisioned under the program (Table 5), net of issuances related to liability-management operations with no net impact on outstanding NFPS debt. External borrowing comprises issuance of international bonds and other borrowing with non-official external creditors. - Disbursement from other multilateral institutions: floor on NIR adjusted downward/upward by the shortfall/excess in loan disbursement by IFIs and grants relative to the baseline projection reported in Table 6. Program loan disbursements defined as external loan disbursements (excluding project financing) from official creditors freely usable for financing NFPS budget operations. - Oil prices: floor on NIR adjusted upward/downward by US$11.93/US$23.85 million at corresponding test dates for each US$1 per barrel that the average Ecuador mix crude oil price is above/below the program assumption in Table 3. Adjustor capped at US$178.9 million at corresponding test dates. - Price calculation periods for oil adjustors: January 1, 2025 to each test date for 2025 targets; November 1, 2025 to January 31, 2026 for end-January 2026 target. - Monitoring: - For 2025 targets, change in NIR measured as cumulative change in stock of NIR between the beginning of the year and the last day of the corresponding test date month as shown in Table 2. - For end-January 2026 target, change in NIR measured as change in stock of deposits between November 1, 2025 and January 31, 2026. - For remaining 2026 targets, measured as change in stock of deposits between January 31, 2026 and the last day of the corresponding test date. - Foreign exchange asset and liability data provided to the Fund at weekly frequency within 5 business days following the end of the week. ### Indicative targets — D. Ceiling on the Stock of PGE Payment Arrears to the Domestic Private Sector - PGE defined as above. - Arrears definition: - Other accounts payable included in the definition of PGE debt that are overdue for more than 90 days from date of accrual. - Stocks of “cartas de crédito” explicitly excluded from the definition of arrears for this IT. - Monitoring: - Below the line fiscal data referring to PGE accounts payable provided to the Fund with a lag of no more than 60 days after the end of each test date as shown in Table 2 and preliminary data with lag no more than 45 days after end of each month. - Data to include breakdown by economic sector of accounts payable with an “of which” detail for amounts overdue by more than 90 days from date of accrual. ### Indicative targets — E. Floor on Social Assistance Scheme Coverage - Social assistance coverage for poor families: - Computed as sum of all active beneficiary family units in the three bottom deciles of the income distribution that benefit from at least one social assistance program. - Poor beneficiary families defined according to information in the RS2018. - Programs counted toward coverage (in force on issuance date of the program) include: - Bono de Desarrollo Humano (BDH); - BDH con Componente Variable (BDH-V); - Bono Joaquin Gallegos Lara; - Pension Mis Mejores Años; - Pensión Toda Una Vida; - Bono para niños, niñas y adolescentes en situación de Orfandad por muerte violenta de la madre o progenitora; - Cobertura de Contingencias; - Bono para personas afectadas por eventos de origen natural o antrópico; - Bono 1000 Días; - and other monetary transfers that might be set in place to strengthen the social protection net. - The level (size) of benefits (number of family units) of any cash transfer programs in the bottom three deciles should not be reduced relative to their level on May 1, 2024. - Monitoring: - Monthly data on (i) number of family units in the lowest three income deciles covered by social assistance programs, and (ii) monthly data on numbers of registries with information updated and validated following RS2018 by income decile provided to the Fund with a lag of no more than 30 days after the end of each month. ### Other information and reporting requirements - In addition to data for program conditionality, authorities will provide Fund staff additional data to ensure adequate monitoring of economic variables. - Fiscal data reporting lags referenced in monitoring sections: - 60 days from end of each test date (fiscal data for NFPS non-oil primary balance); - Preliminary monthly data within 30 days after end of each month (where specified); - 90 days after end of each test date for overall balance submissions (and preliminary data within 30 days); - 5 business days for monthly BCE amortizations and disbursements to the Fund and weekly foreign exchange asset/liability data within 5 business days following the end of the week; - 45 days for preliminary PGE accounts payable monthly data. - Debt instrument definition (per GFSM 2014 and Public Sector Debt Guide): a financial claim requiring payment(s) of interest and/or principal by debtor to creditor at a future date or dates. *Italic source attribution: IMF document excerpt.* ### 70. All liabilities included in the GFSM balance sheet are considered debt, except for liabilities in ### All liabilities included in the GFSM balance sheet are considered debt, except for liabilities in ### Debt definition and NFPS coverage - All liabilities included in the GFSM balance sheet are considered debt, except for liabilities in the form of equity and investment fund shares and financial derivatives and employee stock options. - Equity and investment fund shares are not debt instruments because they do not require the payment of principal or interest. - Financial derivatives are not considered debt liabilities because no principal is advanced that is required to be repaid, and no interest accrues on any financial derivative instrument. - For the purpose of the program, Ecuador’s NFPS debt includes the following instruments: - Deposit liabilities; - Debt securities including short term liquidity instruments (held by nonresidents, and by residents not included in the NFPS entities); - Loans; and - Other accounts payables. - Any liabilities issued by entities of the NFPS, held as an asset by other entity of the NFPS should be netted out. - Since the consolidation is done at the level of NFPS, central bank lending to the government is included in the stock of NFPS debt. ### Monitoring and data provision (frequency and deadlines) - NFPS stock of debt in US$ will be provided to the Fund monthly with a lag of no more than 90 days after the end of each month. The data submission will also include cross-holdings among NFPS entities. - Daily - Daily monetary and financial data in the template agreed with Fund staff, no later than 1 business days after the end of the day. This template at least will include: - (a) movements of international reserves by inflows and outflows; - (b) Main balance sheet accounts of financial institutions, broken down by private banks, cooperatives and mutuals; and - (c) Daily oil production. - Weekly - Consolidated balance sheets of the banking system, by main accounts, including deposits in the banking system, available funds, credit to the private sector, and credit to the government. - BCE balance sheet. Financial Indicators: Deposits of banks at the BCE. - Weekly monetary data in the template agreed with Fund staff, no later than 5 business days after the end of the week. - Weekly data on international reserves and foreign currency liquidity, in line with SDDS requirements (see http://data.imf.org/?sk=2DFB3380-3603-4D2C-90BE-A04D8BBCE237), no later than 5 business days after the end of the week. - Monthly - Data on stocks and flows (above- and below the line), disaggregated by each subsector of the NFPS (budgetary central government and CFDD, rest of the central government, subnational governments, SOEs and social security) using the templates previously agreed with the IMF team. One template with the detailed data on revenues and expenditures of each of the subsectors and the consolidations between them, and the other template data by subsectors with a summary of above the line data and the comparison with the below the line data for monitoring the statistical discrepancy and data on stocks of financial assets and liabilities and the financing (below the line data) also by subsectors. - NFPS financing data compiled based on the detailed information on financial assets and liabilities, namely, deposits, loans, securities, equities, other accounts payable including oil related, and their amortizations, disbursements, and arrears accumulation. - Data on amortizations and disbursements of credit from the BCE to NFPS and to publicly-owned banks for the purpose of financing the NFPS will be provided within five business days from the end of the month. - PGE cash flow data from the beginning to the end of the current fiscal year, with a lag of no more than 60 days after the closing of each month. This will include expected monthly amortizations and repayments on NFPS debt as defined above. - Data on social spending, including Bono de Desarrollo Humano (BDH), Bono de Desarrollo Humano con Componente Variable (BDH-V), Personas con discapacidad, Pensión para Adultos Mayores, Mis mejores años, Pensión Toda Una Vida, and Bonos Mis Primer 1000 Dias, Bono para niños, niñas y adolescentes en situación de Orfandad por muerte violenta de la madre o progenitora, Cobertura de Contingencias, Bono para personas afectadas por eventos de origen natural o antrópico, as well as Bono Joaquin Gallegos Lara. - Data to determine the latest net SDR position at the end of each month. For the central government, this would include total external liabilities with the SDR department. For the central bank, this would include total SDR holdings. All reported data should be denominated in SDRs. - Provision of detailed information on collateralized debt and debt with similar arrangements, such as repo transactions and other similar debt involving the pledge, sale/resale, or encumbrance of assets within 2 weeks of signing new contracts. The information on collateralized debt and debt with similar arrangements will include all contracts related to such debt; information on the escrow accounts overseas that serve as collateral; and detailed information for each creditor on the stock of debt, its terms (including on the amounts pledged, sold/resold, or encumbered, as well as any related commitments or obligations to purchase related or unrelated goods and/or services from the lender), and expected repayment schedules. - Export price of Ecuador mix crude oil, with a lag of no more than 20 days after the closing of each month. - Quarterly - Detailed balance of payments data, no later 90 days after the end of the quarter. - Detailed fiscal and debt data by the subsectors of NFPS, no later than 90 days after the end of the quarter. This data includes: above and below the line data, summary of the statistical discrepancy, calendar of amortization and payment of interest by instrument of debt stock at the end of the quarter and stock of gross debt. ### Program performance and recent economic developments - Program implementation has remained strong. All quantitative performance criteria (QPCs) and most indicative targets (ITs) for the third review were met. - Real GDP expanded by 3.8 percent year-on-year in the first half of 2025, driven by record non-oil exports and stronger domestic demand. - IMF staff revised its 2025 growth projection upward from 1.7 percent to 3.2 percent. - The Central Bank of Ecuador adjusted its forecast from 2.8 percent to 3.8 percent. - Inflation registered 0.7 percent for the past twelve months as of September 2025. It is expected to rise temporarily by year-end and stabilize near 1.5 percent. - The current account surplus reached 4 percent of projected GDP in the first half of the year, and the Central Bank projects a surplus of 6 percent of GDP by year-end. - Non-financial public sector deposits rose from US$3.8 billion at end-2023 to US$4.9 billion by end-August 2025, exceeding the program target by US$243 million. - Central government arrears to domestic private suppliers declined from approximately US$900 million at end-2023 to US$480 million as of end-August 2025; the end-August ceiling IT of US$400 million was not met. - Public debt is projected to reach 53 percent of GDP by year-end, on a firm downward path and on track to achieve the 40 percent of GDP target by 2031, one year ahead of schedule. ### Fiscal policy and public financial management reforms - Authorities implemented high-quality, permanent fiscal measures to achieve a cumulative fiscal consolidation of 3.5 percent of GDP over 2024–2025. - The fiscal plan envisages an overall fiscal consolidation of 6.6 percent of GDP over the program period. - Actions to strengthen PFM, fiscal governance, and operational efficiency include: - Streamlining ministries and secretariats from 29 to 17 (July). - Launching a system to automate central government payments (September) with IMF technical assistance, to facilitate payment prioritization and enhance transparency. - Steps to upgrade the procurement system and operationalize the National Control Subsystem with IDB support to strengthen procurement transparency and expenditure control. - Introduction of a structural benchmark to publish an audited actuarial report for the social security system. ### Social protection measures - Expansion of cash transfer programs for households in the lowest three income deciles surpassed the end-August program target by over 13,000 families. - In September, a comprehensive package of temporary compensatory measures was introduced to mitigate the impact of reforms on vulnerable groups. - 55,000 new families were added to the coverage of cash transfer programs in the lowest three income deciles in October, with a focus on older adults and people with special needs. - Authorities committed to updating the social registry to reduce coverage gaps and better target social protection programs. ### Financing plan and market access - Multilateral and official bilateral lending remain primary sources of external financing. - Authorities have engaged with official bilateral creditors to secure positive net financing over the remainder of the program and are keen on advancing timely financing of projects shared with China’s Exim Bank. - Plan to regain market access in 2026 remains on track. - Successful permanent revenue mobilization has contributed to a downward trajectory of sovereign spreads. - Authorities aim to meet the external bond amortization due in January 2026. - Engagement with market participants is ongoing to prepare for a successful external debt issuance in the second half of 2026. ### Financial sector policy and regulatory reforms - The financial sector remains broadly stable; favorable liquidity conditions contributed to a recovery in credit growth. - Most financial soundness indicators for banks and cooperatives improved during 2025, including asset quality, provisioning levels, and solvency ratios. - A medium-sized credit cooperative was liquidated in July; the event did not pose systemic risks and its impact was limited, with partial transfer of assets and liabilities to other credit cooperatives. - Temporary regulatory forbearance introduced in response to last year’s electricity crisis expired in September 2025; authorities committed to resume proper loan classification and provisioning. - Institutional reforms: - National Assembly approved legislation to merge the Financial Policy and Regulation Board with the Monetary Policy and Regulation Board into a single entity responsible for both monetary and financial regulation. - Reform updates the Central Bank’s mandate in accordance with international best practices and addresses prior coordination and information-sharing challenges identified in the IMF’s 2023 Financial System Stability Assessment for Ecuador. - Reforms to enhance credit market efficiency and domestic capital market development: - Authorities are developing a new methodology for setting interest rates to replace lending rate caps. - Measures are on track to improve institutional and market infrastructure to develop the domestic debt market. ### Structural reforms and governance - Comprehensive structural reform agenda aims to foster job-rich growth and enhance economic resilience. - Measures to attract private investment in mining and energy: - Reopened the cadaster for non-metallic small-scale mining in June. - With IMF technical assistance, developing a new fiscal regime for mining. - Electricity sector reforms after 2024 outages include: - Diversifying electricity sources and improving preparedness for natural disasters. - Adoption of a transparent and cost-reflective pricing mechanism for medium- and high-voltage electricity tariffs. - Enacted secondary regulations allowing private entities to sell surplus electricity from self-generation to the national grid. - Governance and AML/CFT improvements: - Audits of state-owned oil enterprises: completion of 2019 and 2020 audits; 2021 audit finalized in September; roadmap to address 2021 audit findings and a public tender for audit of 2022–2024 financial statements by February 2026. - New AML/CFT law, aligned with FATF standards and approved in July 2024, entered into force in July 2025. - IMF technical assistance to develop an AML/CFT Strategic Action Plan. ### Concluding assessment - Authorities have made substantial progress implementing their economic program through high-quality reforms and a comprehensive structural reform agenda. - Progress supports durably strengthening fiscal sustainability, safeguarding macroeconomic stability, and fostering job-rich growth and economic diversification. - Authorities express deep appreciation for the Fund’s continued financial, policy, and technical support. *Statement by André Roncaglia, Executive Director for Ecuador, Bernardo Acosta, Alternate Executive Director, and Felipe Antunes, Alternate Executive Director — October 29, 2025* --- _Source: https://www.imf.org/-/media/files/publications/cr/2025/english/1ecuea2025002-source-pdf.pdf_